04-08-2021, 04:52 PM
Just in case someone else reads this thread, this article has the final word on the subject: https://www.forbes.com/sites/jimdahle/20...55b9775ce7
No Waiting Period Required
A lot of people, including some financial professionals, were concerned for many years that the IRS might apply the "Step Doctrine" to this indirect Roth IRA contribution process. The Step Doctrine is a concept occasionally employed by the IRS that if the sum of a number of steps is illegal, the process is illegal even if each of the steps is legal. It's easy to see why one might worry this could apply to the Backdoor Roth IRA process. Due to this fear, many advisors actually advocating waiting some period of time (weeks, months, sometimes a year or more) between the contribution and conversion step, or worse, recommended against doing it at all. However, despite thousands of investors doing this every year (and reporting it to the IRS on Form 8606) the Step Doctrine was never applied. Finally, in 2018, the IRS issued clarification that no waiting period was required, essentially giving the Backdoor Roth IRA their blessing. Unfortunately for those who never funded their Roth IRAs or complicated their tax paperwork and ran up the tax bill on the Roth conversion step by leaving the money in the traditional IRA for lengthy periods of time, there was no going back.
No Waiting Period Required
A lot of people, including some financial professionals, were concerned for many years that the IRS might apply the "Step Doctrine" to this indirect Roth IRA contribution process. The Step Doctrine is a concept occasionally employed by the IRS that if the sum of a number of steps is illegal, the process is illegal even if each of the steps is legal. It's easy to see why one might worry this could apply to the Backdoor Roth IRA process. Due to this fear, many advisors actually advocating waiting some period of time (weeks, months, sometimes a year or more) between the contribution and conversion step, or worse, recommended against doing it at all. However, despite thousands of investors doing this every year (and reporting it to the IRS on Form 8606) the Step Doctrine was never applied. Finally, in 2018, the IRS issued clarification that no waiting period was required, essentially giving the Backdoor Roth IRA their blessing. Unfortunately for those who never funded their Roth IRAs or complicated their tax paperwork and ran up the tax bill on the Roth conversion step by leaving the money in the traditional IRA for lengthy periods of time, there was no going back.