A backdoor Roth avoids the pro-rata rule by moving all pre-tax IRA money into an employer plan before December 31. A backdoor Roth means making a nondeductible traditional IRA contribution and then converting it, leaving only after-tax basis to convert.
A backdoor Roth is a two-step workaround for earners blocked from direct Roth contributions. You contribute nondeductible money to a traditional IRA, then convert that balance to a Roth IRA. According to Medical Economics, conversion tax then applies only to untaxed amounts and earnings, in its Medical Economics guide.
Table of Contents
- Why does one old IRA poison the conversion?
- How does a zero balance fix it?
- Can you move every dollar?
- What steps keep the conversion clean?
Why does one old IRA poison the conversion?
The IRS treats all traditional, SEP, and SIMPLE IRAs as one account on Form 8606. Perissos Private Wealth explains that you cannot select only after-tax dollars for conversion. Each conversion splits proportionally between tax-free basis and taxable pre-tax money.
For example, a saver holds $67,500 pre-tax plus a $7,500 nondeductible contribution. Converting $7,500 gives only $750 tax-free while $6,750 is taxable ordinary income. Perissos Private Wealth uses this math breakdown to show how pre-tax balances poison the conversion.
How does a zero balance fix it?
The aggregation test looks at December 31 balances of all traditional, SEP, and SIMPLE IRAs plus distributions and conversions. The pre-tax balance must read $0 on December 31 of the conversion year for a clean result. The IRS explains this timing test in its reporting guidance.
Perissos Private Wealth notes that savers shrink that taxable pool by rolling pre-tax IRA money into a 401(k), 403(b), or governmental 457(b). Those employer plans sit outside Form 8606 aggregation. With no pre-tax IRA left, the later conversion draws almost fully from basis.
Can you move every dollar?
Only pre-tax IRA amounts may make that reverse rollover under federal rollover rules. The receiving plan must affirmatively accept incoming IRA rollovers. NAPA and the American Retirement Association describe this limit in its March 2026 case review.
After-tax basis must remain behind for Roth conversion. Ask your plan administrator before you start the contribution. If the plan refuses rollovers, the strategy will not clear the pro-rata pool.
What steps keep the conversion clean?
Report both the nondeductible contribution and the conversion on Form 8606. Stay within the 2026 combined IRA limit of $7,500, or $8,600 at age 50 and older.
The IRS details the form in its overview of Form 8606. Prompt conversion limits taxable earnings. Full conversion keeps the year-end balance at zero.
- Convert promptly before earnings accrue.
- Convert the full traditional balance to keep it at zero.
- Confirm a $0 December 31 IRA balance.
