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In January 2013, I made a 2013 contribution to a traditional IRA, and then converted it into a Roth IRA. That contribution was not deductible. Thus, there was no tax effect. However, later in 2013, I am planning to rollover my pre-tax funded retirement plan to that traditional IRA. Does this mean I will have to consider the January 2013 conversion to include a pro-rata share of the rollover or can I recognize that the conversion happened before the rollover?


The BIDaWIZ Team's Answer:

As per IRS publication 590, traditional IRA contributions and Roth IRA conversions for taxable and non-taxable reporting purposes, are treated on an annual basis. Thus, the fact that you converted nondeductible contributions from a traditional IRA before you rolled over your taxable 401k to a traditional IRA, does nothing to avoid the pro-rata share requirement. The IRS will view the tax deductible and non-deductible contributions to the traditional IRA as occurring in the same year and thus subject to taxes. Our recommendation would be to wait until 2014 to do the 401k/retirement plan rollover.

The BIDaWIZ Team



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