One of the topics that always comes up when we discuss financial planning is the backdoor Roth IRA conversion. Thus, we are creating this brief reference guide on the topic for your edification. Enjoy!
First, if you want the basics on a Roth IRA conversion, please check out this video from Morningstar. The years and MAGI figures mentioned in the video are a little bit dated, so please click here to check out the most current figures.
Next, if you want a more detailed, written explanation of how the backdoor Roth IRA conversion works, please check out this helpful article from Investopedia. Or, if you really, really want to dig into the weeds, check out this definitive guide by Ed Slott, the Master of everything IRA. After reading Ed Slott’s guide, if you still have some concerns about how the IRS would treat backdoor Roth IRA conversions as it relates to the step-transaction doctrine, please check out the articles here and here (TLDR: the IRS is cool with it).
Lastly – and this is perhaps the most important and often forgotten part – you will need to fill out Form 8606 on your annual tax returns to reflect your backdoor Roth IRA conversion. Confused? Fear not, for Jim Dahle at the White Coat Investor has provided a detailed, step-by-step guide and video on how to tackle this tricky form. If you use TurboTax to file your taxes, this walk-through from The Finance Buff should be very helpful (or you can use this guide for H&R Block). Don’t worry, if you make a mistake or two, Jim also has a dedicated page on how to fix your mistakes.
Of course, if you have any questions, please feel free to reach out to us here at Triple Summit!
