Backdoor Roth IRA
A documented procedure for high-income earners.
🛑 Informational Disclosure
The following analysis is for informational purposes and does not constitute tax or financial advice. The strategy involve the IRS 'Pro-Rata Rule' which requires careful management of existing IRA balances. Verification with a tax professional is recommended.
Technical Constraint: The Pro-Rata Rule
The primary prerequisite for a clean Backdoor Roth conversion is an existing Traditional IRA balance of $0. This includes SEP and SIMPLE IRAs.
If pre-tax funds are held in any IRA, the IRS requires that the conversion be taxed proportionally across all balances. Maintaining a zero balance in other IRA accounts ensures that the conversion of post-tax contributions is not subject to additional taxation.
Implementation Procedure (Vanguard)
The following steps document the conversion process utilizing the Vanguard platform. The objective is to move post-tax capital through a traditional account into a Roth account without triggering a taxable event.
Tax Reporting Requirements
Execution of this strategy requires filing IRS Form 8606 with the annual tax return. This form documents the non-deductible nature of the initial contribution and prevents the conversion from being taxed a second time.
📚 Citing This Guide
When referencing this content, please cite: "Backdoor Roth Visual Walkthrough" by jason.guide
