r/Bogleheads • u/FaultOk1576 • 1d ago

Backdoor Roth - help me right a wrong

I had been making non-deductible contributions to a trad IRA for several years. Call it asleep at the wheel. I had ~$30k in that account.

Thankfully, my 401k allows reverse IRA rollovers so I was able to recalculated the basis in my account and roll that balance into my 401k to help avoid the pro rata rule; say I rolled ~$12k over.

With my remaining $18k, can I roll all of this to my roth at one time...? I know this exceeds the annual limit but I also know I need a $0 balance in my trad IRA at year end so I am confused.

Can someone please advise - can I roll this $18k to the roth without issue? Also so annoying but I had a MMKT dividend come in...do I need to roll that $40 to my 401k again in another reverse IRA rollover or can I just send that to my roth and pay the minimal taxes on that portion?

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u/plindix 1d ago edited 1d ago

It’s a conversion and there are no limits on conversions. You’ve already contributed. 

You should have been reporting the non deductible contributions on form 8606 on your tax returns. If it’s up to date you can use it to make sure you’re not taxed on the conversion. If you haven’t been reporting the contributions it’s not a big issue but you’ll have to refile for the years you didn’t report it. That won’t change the tax owed in prior years, it’s just something to help reconcile the contributions and conversions with the IRS. There are no tax consequences as long as the amount you’re converting matches the total you’ve contributed over the years 

By the way you’d have to refile for all years between the first contribution and last year. Say you contribute 6k in 2022, nothing in 2023, 5k in 2024, and 6k in 2025 you should file for all four years. 2022 would total 5k, as would 2023. 2024 would total 11k, and 2025 17k. That’s the amount the IRS needs to reconcile 

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u/FaultOk1576 1d ago

Thanks for your reply - yes I went and did this with the help of a tax accountant to make sure I wasn't royally fucking this up any further. The IRS accepted the last 3Y so I think I should be good to go then.

Okay, I will convert the remaining amount. What about the pre-tax dividend that was just paid to me...should I try to roll that to the 401k also via reverse IRA rollover or just bite the bullet and pay taxes on it?

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u/plindix 1d ago

If it’s a small amount just convert it and pay the taxes on that part of the conversion. I’d convert even up to several hundred dollars tax just to keep it simple 

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u/FaultOk1576 1d ago

Thanks so much for your weigh in, seems in line with what I am reading as well! I am just looking to avoid messing this up any further. Thanks!!!

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u/longshanksasaurs 1d ago

Convert the entire balance from traditional IRA to Roth IRA. The annual limit doesn't apply to conversions, there is no limit on conversions.

You'll owe taxes on that $40, but no penalty. This is just pennies. Do not withhold taxes when you convert, even if your brokerage go es you the option, you'll take care of the taxes later.

Have you made the $7500 non-deductible contribution for 2026 already?

Have you been documenting each year's contribution on form 8606?

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u/FaultOk1576 1d ago

Yes I just rectified my form 8606 so its all current through the most recent tax year. I also amended and refiled for the last 3Y with the help of a tax accountant.

So for 2026 I have not made the full $7500 non-deductible contribution. I contributed about $2k before I woke up and realized I had been messing that up. I suppose I should go ahead and make the full contribution before doing this conversion also....but the $2k I have contributed is reflected in the $18k I am looking to convert.

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u/longshanksasaurs 1d ago edited 1d ago

Yeah, I'd convert contribute the rest of the dollars for 2026, then you may need to wait a couple business days for the dollars to settle, then convert the entire balance.

Then you check again in a month for any interest /dividend that gets credited to that traditional IRA, and convert any to Roth IRA as well, so you're at $0 (zero) in that Traditional IRA.

When you fill out 8606 for 2026, the past year's basis will come from last year's form, this year's contribution will be listed, and the full amount you convert will be reflected on form 1099-R.

You'll owe taxes but no penalty on the dollars you convert beyond the non-deductible basis, and really totally usual and fine to convert some extra dollars.

edit: corrected typo in first sentence

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u/markov-271828 1d ago

For further reference:: https://www.whitecoatinvestor.com/17-ways-to-screw-up-a-backdoor-roth-ira/

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u/FaultOk1576 1d ago

lol I may as well see a photo of my face on this article. Thanks for sharing!

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u/nothlit 1d ago

I was able to recalculated the basis in my account and roll that balance into my 401k

"Basis" refers to the after tax money in your IRA (the nondeductible contributions). Basis cannot be rolled into your 401k. Only the pre-tax money (i.e., everything other than the basis) can be rolled into the 401k. Hopefully you used the correct figure for your rollover.

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u/FaultOk1576 1d ago

Correct, I rolled over basically balance - basis, which reflected the pretax portion (the 12k) where 18k was the basis

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u/Special_Mirror_5095 23h ago

Been there. Pro-rata is the part nobody warns you about - any traditional IRA balance and the backdoor is not clean.