Does the pro-rata rule ruin my backdoor Roth if I have a SEP or SIMPLE IRA?
It can. The IRS pro-rata rule aggregates all your Traditional, SEP, and SIMPLE IRA balances when calculating the taxable portion of any conversion. If you have pre-tax money sitting in a SEP-IRA, your backdoor Roth conversion becomes partly taxable in proportion to that pre-tax balance, defeating the point. Common fixes: roll the pre-tax IRA money into your current employer's 401(k) if the plan accepts rollovers, which removes it from the pro-rata calculation because 401(k) balances aren't counted. Do the rollover before December 31 of the conversion year, since the IRS measures your IRA balances on year-end. Self-employed people relying on a SEP-IRA often can't cleanly do backdoor Roths for this reason.
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