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Backdoor Roth Mistake?
Old 06-08-2012, 11:37 AM   #1
Confused about dryer sheets
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Backdoor Roth Mistake?


I jumped on the backdoor Roth wagon a little too quickly and made a mistake. I didn't realize that my Rollover IRA would cause a tax issue. Is it possible to fix this?

I have a Rollover IRA with $113k
I opened a Traditional IRA with $5k and converted the funds to a Roth IRA a few days later.

I just did this a few days ago. If I rollover my Rollover IRA to my current TSP would this avoid any tax issues at the end of the year?
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Old 06-08-2012, 11:42 AM   #2
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Is the traditional IRA that you converted to a Roth separate from the rollover IRA? If so, as long as you are allowed to roll that $113K into TSP I don't see where the problem is, that should be an account transfer with no tax consequences. What am I missing?
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 06-08-2012, 11:46 AM   #3
Confused about dryer sheets
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That's correct they're separate and there would be no tax consequences in transferring the rollover IRA to my TSP. Just wanted to make sure the pro-rata issue is only calculated on IRA balances at the end of the year --- which if I rollover would be 0$.
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Old 06-08-2012, 12:33 PM   #4
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I believe there is some % rule that you have to take consideration of all your IRA accounts. You can't just say I am going to convert this $5k that has had no earnings you have to say that $5k is 5% of your $100k IRA total and then get taxed on 5% of your earnings or something to that effect.
I am by no means an expert, as you can tell from that above jumbled paragraph, but someone who is more eloquent will probably be by and explain it better.
I don't want to spend my entire life at work. I deserve more. - Want2retire aka W2R
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Old 06-08-2012, 01:46 PM   #5
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Worst case is you pay taxes on most of that $5k on your 2012 tax return. At least nothing you have to go back and file a 1040x for.

I'd read the IRS instructions very carefully to see if you can retroactively make the rollover IRA disappear. There always seems to be a rule about things like that.
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Old 06-08-2012, 06:47 PM   #6
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Originally Posted by Misterfun View Post
If I rollover my Rollover IRA to my current TSP would this avoid any tax issues at the end of the year?
Yes that'll work.
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