IRS "unlocks the back door"

[mrWinter]

According to Forbes, the IRS has basically greenlit the backdoor Roth contribution.

Donald Kieffer Jr., a tax law specialist with the IRS’s Tax-Exempt and Government Entities Division, gave the Back-Door Roth IRA it’s biggest vote of confidence yet.

i think the IRS’s only caution would be whenever we see words like ‘back door’ or ‘workaround’ or other step transactions that are putatively enabling a way to get around limits – especially statutory contribution limits – you generally find the IRS is not happy and prepared to challenge those,” Kieffer said. “But in this one that we’re talking about, it’s allowed under the law.” (emphasis added)

No reason given why this step transaction is special.

 

[SevenUp]

See https://www.bogleheads.org/forum/viewtopic.php?t=238910 for some background.

 

[Ronnieboy]

I have been doing it for years, back when they took the income limits off in 2006. Was their talk of closing it off?

 

[bada bing]

I have been doing it for years, back when they took the income limits off in 2006. Was their talk of closing it off?

+1

I started doing "backdoor" Roth contribution in 2010 and thought I was a late adopter. Initially I was careful to wait a couple months and pay taxes on some gains to avoid the appearance of step transactions. The last few years I just let 'er rip and convert the day after the deposit.

The "backdoor" Roth and the "mega-backdoor Roth" are both maneuvers I use and appreciate, but they have me scratching my head over why the subterfuge is required. Why not do away with the pro-rata rule and income limits on Roth contributions and raise the Roth contribution limit on 401Ks? Dunno

 

[RunningBum]

From what I was told here, and verified, 2010 was the first year the income limit for Roth conversions was removed. Maybe there was some other way in 2006, or raised limits.

 

[rayvt]

Because of the pro-rata rule, backdoor Roth generally doesn't make sense if you have any significant amount of money in your regular IRA(s).

"The Pro-Rata Rule: A Backdoor Roth Land Mine"

 

[trumpeting_angel]

Because of the pro-rata rule, backdoor Roth generally doesn't make sense if you have any significant amount of money in your regular IRA(s).

"The Pro-Rata Rule: A Backdoor Roth Land Mine"

I confess that Roth conversions are only a recent interest of mine; I'm interested in this issue. Was that supposed to be a link? It doesn't click . . .

Thanks in advance, Ray, from a fellow Vermonter

 

[pjigar]

Pro-rata rule can bypassed easily by transferring the entire pretax IRA balance to 401K account which most people should have if they are exploring backdoors.

 

[joeea]

I confess that Roth conversions are only a recent interest of mine; I'm interested in this issue. Was that supposed to be a link? It doesn't click . . .

Thanks in advance, Ray, from a fellow Vermonter

https://blog.foxwealthmgmt.com/2017/07/13/the-pro-rata-rule-a-backdoor-roth-land-mine/