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Tax Planning/IRA to Roth IRA Conversion


Hi Owen,

I actually have two questions if it's ok. The first very simple.

1) My wife and I make about $240k combined and both contribute to a workplace retirement plan (401K) My account told me that because of the salary and the fact that we contribute to a workplace retirement plan, that we cannot contribute to any IRA. I was sure that we can contribute to a traditional IRA, but we just can't take a deduction for the contribution. Can you please weigh in on this?

I am going to continue with my second quesion, assuming that I CAN contribute to the traditional IRA.

2) I have read about a "back-door Roth IRA contribution" ( and, naturally, it is interesting since distributions in retirement are tax free.

But, I just want to make sure I am clear. Here is my situation:
In 2000, I started a Roth IRA (two actually, one for me and one for my wife). They only have a small amount in them as I have not contributed in years (about 14k and 7k). From what I am reading about the back-door Roth, it seems I can set up two traditional IRAs and use them as a temporary holding spot.

I contribute to the traditional IRAs, then the next day, convert that contribution to my Roth.

Is that correct? It seems too good to be true and, really, if the government is willing to allow that, why not just allow anyone to contribute to the Roth?

Can you please tell me if I have this correct?

Thanks so much for your time,

Rich - what you don't tell me is how much each of you earns.  You give me the combined amount.  But, no matter, it is a perfectly legitimate strategy.  But keep in mind that the limits are still the same on your maximum annual contribution.  Either way, it's not going to save you any current income taxes.  I think there is a better way than this, but please call me and I can discuss it with you as this is not the correct forum for my idea.  My phone number is 916-974-9393.

I hope this clarifies your understanding.

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.


I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

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Enrolled Agent, Admitted to Practice Before the IRS, Accredited Tax Preparer, Fellow of National Tax Practice Institute, Certified QuickBooks ProAdvisor (1999-2011), Sleeter Group Certified QuickBooks Consultant, Life & Disability Insurance Agent License (California, Texas, Maine), Real Estate Agent License (California); Many years of continuing education in all these fields.

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