How to handle Traditional IRA, employer 401k, and non-deductible contributions for 2025

If they go with the backdoor Roth option, don't they need to be careful about the pro-rata rule if they have other pre-tax money in any traditional IRAs? Also, is there a deadline for recharacterizing vs converting?

Yes, the pro-rata rule is definitely something to consider with the backdoor Roth. If you have existing pre-tax money in any traditional IRA (including SEP or SIMPLE IRAs), you can't just convert the non-deductible portion tax-free. The IRS looks at all your IRAs as one pool, and taxes a portion of the conversion based on the ratio of pre-tax to after-tax money. For deadlines, recharacterization must be completed by your tax filing deadline including extensions (typically October 15th of the following year). Roth conversions must be completed by December 31st to count for the current tax year, but there's no deadline in the sense that you can convert anytime - it would just count for whatever tax year you do it in.

How exactly does the contribution analyzer work? Does it just tell you what to do or does it actually help with filling out forms? I'm in the same boat but completely lost on how to document this properly.

I'm skeptical of these services that promise to simplify complex tax situations. Did it actually save you any money compared to just talking to a CPA? And how much access to your financial info do they need?

The contribution analyzer starts by asking about your current retirement accounts, income, and contribution history. Then it runs your information through their tax calculation engine to identify the optimal strategy for your specific situation. It gives you step-by-step instructions and generates the required documentation. Regarding cost comparison, I actually tried both routes. My CPA wanted to charge me $350 for this specific issue alone, on top of regular tax prep fees. The service ended up being significantly more affordable while providing the same guidance. As for financial information, they only need what's relevant to the specific retirement account issue - income level, existing retirement accounts and balances, and contribution history. Nothing more invasive than what you'd share with any tax professional.

How does this actually work? Do they just call the IRS for you or what? I've been on hold with them for 2+ hours multiple times.

This sounds too good to be true. The IRS phone system is notoriously awful. I find it hard to believe any service can magically get through when millions of people can't. Sounds like an ad to me.

They use a technology that navigates the IRS phone system and holds your place in line. When they reach a live agent, you get a call to connect with that agent. It's not that they have some special access - they're just using technology to handle the hold time for you. I was skeptical too, which is why I watched their demo video first. But after trying it myself, it actually worked exactly as advertised. I got a call back when they reached an agent, and I was connected right away. The whole process took about 17 minutes when I had spent literal hours trying on my own. Not trying to convince anyone, just sharing what worked for me when I was desperate for answers about my IRA situation.

Can you explain more about this mega backdoor Roth thing? I've never heard of it and I'm trying to figure out what to do with my own non-deductible contributions.

The mega backdoor Roth works if your employer 401k plan allows for after-tax contributions beyond the standard elective deferral limit, AND permits in-plan Roth conversions or in-service distributions. Basically, after you max out your regular 401k contributions ($22,500 for 2025), some plans allow you to make additional after-tax contributions up to the total annual limit ($66,000 for 2025 minus employer match and your contributions). Then you immediately convert these after-tax contributions to Roth, either within the plan or by rolling them into a Roth IRA. This is different from the regular backdoor Roth, which involves non-deductible IRA contributions. The mega backdoor happens entirely within your 401k plan and allows for potentially much larger conversions.

Is 8606 required even if you recharacterize to Roth before the tax deadline? My brokerage told me I wouldn't need to file any special forms if I did that.

If you properly recharacterize the contribution to a Roth IRA before the tax filing deadline, you generally don't need to file Form 8606 because the contribution is treated as if it went directly into the Roth originally. However, your brokerage should provide you with Form 5498 showing the recharacterization, and you'll need Form 1099-R if there were any earnings that got moved with it. I'd double-check with a tax professional though, since the rules can get tricky depending on timing and whether there were any earnings involved.