IRA contibution question

[neilbrink]

Client is telling me that his Edward Jones agent had my client write out a check for $11,000. for a traditional IRA of $5500 for 2015, and an additional contribution of $5500 for 2016.  My client does not qualify for a deductible IRA and does not qualify for a Roth IRA.  The agent is telling my client that he can still put into his traditional IRA for 2015, and then immediately convert it to a Roth IRA for 2015.  I cannot see how this can be done.  Doesn't the conversion have to be done during the year, in other words, in this case, doesn't it have to be done before the end of 2015?

 

[Lion EA]

He'll have a traditional IRA contribution for 2015 and one for 2016.  Sounds like non-deductible.  He can contribute to 2015 through Monday, as long as Edward Jones designates it as 2015.  Then, at any time, but I like before any earnings attach, he can convert each one to a Roth.  If he has IRAs with and without basis, it's a bit more complex.  But, from your viewpoint, on his 2015 income tax return, he's making a non-deductible contribution to a traditional IRA.  You won't see paperwork showing Roth balances until his 2016 paperwork comes out next year.

[jklcpa]

It's a backdoor Roth IRA. A good explanation is here.

[neilbrink]

Traditional IRA deposit will be allowed for 2015, but the conversion won't take place until 2016.  Got it.  Thanks.