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Backdoor Roth: Frequently Asked Questions and Issues

If your income is too high to contribute directly to a Roth IRA, which is the case for most attending physicians, the Backdoor Roth IRA can be a powerful and legal workaround to turn pre-tax dollars into tax-free growth. Given the steps involved in the process, we get a lot of questions related to the Backdoor Roth IRA on our online physician community, especially around the beginning of the year as doctors look to maximize their tax-advantaged retirement options. Below, we cover the most common FAQs we get to help doctors navigate the process. We highly recommend working with a financial advisor and CPA to ensure a Backdoor Roth makes sense in your situation and that you've completed the proper reporting for tax purposes. If you need help, explore our accountant database for doctors and our financial advisors database for physicians.


Disclaimer: Our content is for generalized educational purposes.  While we try to ensure it is accurate and updated, we cannot guarantee it. Rules/laws can change frequently.  We are not formal financial, legal, or tax professionals and do not provide individualized advice specific to your situation. You should consult these as appropriate and/or do your own due diligence before making decisions based on this page. While we have attempted to explain this to the best of our ability, we are not accountants or financial advisors and this is complex information that can be misinterpreted or unclear. To learn more, visit our disclaimers and disclosures.


6 commonly asked questions to help doctors understand the Backdoor Roth IRA, including the pro-rata rule, how much you can contribute, and tax forms required



Understanding what a Backdoor Roth IRA is, and why there are so many questions about the process


A Backdoor Roth IRA is a multiple-step strategy that allows high-income earners to get money into a Roth IRA when they exceed the IRS income limits for a regular Roth IRA. The process involves making a contribution to a traditional IRA and then converting that contribution into a Roth IRA.


Because the Backdoor Roth does have several steps, there are logistical questions that can arise at each step, and members of our physician communities often wonder if they messed up part of the process and what the implications will be, particularly on taxes. We'll address some of the most common ones of these below, but as always, consult your accountant to confirm what you should do in your particular situation.


Related PSG resource:



Why would someone use a Backdoor Roth IRA?


A Backdoor Roth IRA allows high-income earners to take advantage of the tax benefits of a Roth IRA, which include:

  • Tax-free growth and withdrawals in retirement

  • No required minimum distributions (RMDs) in retirement (which traditional IRAs are subject to)

  • Can provide tax diversification for your retirement funds


Related PSG resource:



If I'm close to the Roth IRA contribution limit, how do I know if I should do a regular Roth or a Backdoor Roth IRA?


You have two options in this scenario. You can either:


While the Backdoor Roth requires extra steps and paperwork, they are relatively simple and easier than undoing a regular Roth if you contribute and find out later you're ineligible.



Who is eligible for a Backdoor Roth IRA, and is it legal?


Unlike a regular Roth IRA, there are no income limits for a Backdoor Roth, though you must have an earned income to contribute, and your contribution cannot be greater than your earned income.


The IRS has acknowledged the Backdoor Roth, and as long as it's done correctly, it's legal.



Do I pay taxes on a Backdoor Roth IRA?


The contribution to the traditional IRA is made using after-tax, so you will have to pay taxes on the funds you use for your contribution. The contribution itself, however, is generally not taxed again, though the conversion can be.


Taxes can apply to a Backdoor Roth in two ways:



What is the pro-rata rule for a Backdoor Roth IRA?


The pro-rata rule is a way the IRS assesses additional tax considerations on a Backdoor Roth. These taxes can be significant, so they're important to consider before starting the process.


If you have any pre-tax funds in an IRA, your Roth conversion into a Backdoor Roth IRA will be taxed proportionate to your pre- and post-tax percentages of your total IRA holdings. For example, if you put $6,000 into a traditional IRA that always has $54,000 in pre-tax funds, the pro-rata rules dictates that you pay taxes at your marginal tax rate on the prorated amount. In this case, you would pay taxes on $5,400 of your $6,000 contribution.


(non-deductible amount)/(total of all non-Roth IRA balances) = non-taxable percentage

(amount of Backdoor Roth IRA conversion) x (non-taxable percentage) = taxable amount


So for our example:

$54,000/($6,000+$54,000) = 0.90, or 90%

$6,000 x 0.90 = $5,400


Under the pro-rata rule, the IRS requires you to treat all IRA funds as one combined account. This includes:

  • SEP IRAs

  • SIMPLE IRAs

  • Traditional IRAs



Does my 401(k), 403(b), 457 or TSP affect the pro-rata rule?


The pro-rata rule looks at pre-tax funds within IRA accounts. It does not include pre-tax funds in employer-sponsored plans such as 401(k)s or 403(b)s.


If you have pre-tax funds in an IRA account, you may be able to roll your pre-tax IRA balances into your current employer's retirement account to avoid triggering taxation under the pro-rata rule. Not all plans, however, offer this option, and there can be other considerations (fees for employer-sponsored plans, limited investments available within the plan, etc.) to consider before taking this step. We recommend working with a financial advisor or talking to your accountant to assess what options you might have here and the benefits of each.


Related PSG resources:



What accounts do I need to open in order to do a Backdoor Roth IRA?


You will need to have both a traditional IRA and a Roth IRA account. If you don't already have one, you will need to open one. If you have them, you can use the existing ones.



Will I need to reopen IRA accounts every year for a Backdoor Roth?


You can use these same two accounts every year. You don't need to worry about the traditional IRA account closing with a zero balance once you've completed the conversion.



How much can I contribute using a Backdoor Roth IRA and when is the contribution deadline?


The contribution limit for a Backdoor Roth IRA is the same as a traditional IRA or Roth IRA. For 2026, the annual limit is $7,500, with an extra $1,100 catch-up contribution allowed for individuals 50 and older.


You have until the tax filing deadline to make the contribution for a Backdoor Roth IRA. So for a 2026 Backdoor Roth, you would have until April 15th, 2027 to make the contribution. While you have until tax day to make your contribution, to simplify the process and paperwork, we recommend contributing and converting your Backdoor Roth IRA before year end.


It's important to note that IRA contributions are included in your personal tax return, so you would want to make your contribution before you file your taxes, or you’ll have to file an amended return. If you make your 2026 contribution in early 2027, you must reflect this on your IRS Form 8606. Make sure you include your contribution on both Line 1 and Line 4.



What tax forms are required for a Backdoor Roth IRA?


If you're doing a Backdoor Roth IRA, you are required to file Form 8606 with your personal tax return (Form 1040). Failure to file Form 8606 is common, but can be a costly mistake, so make sure either you or your accountant files it with your tax return.


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When should I do a Backdoor Roth conversion?


Most physicians do the conversion from a traditional IRA to a Roth IRA as soon as possible after you make the contribution. This can simplify the tax reporting required and minimize taxable investment gains or interest.



Where should I invest my traditional IRA contribution into when planning a Backdoor Roth?


For simplicity, you can put it in a money market fund. That way it can't lose value. You should convert it as soon as you can, so you aren't losing out on money.


If you invest it in something that losses money, you cannot add more money in as you already made the max contribution for the year.



What happens if my contributions accrue interest before I complete the conversion?


Gains on contributions converted are subject to taxes, which is why we recommend doing the contribution ASAP. It can take a a few days for funds to settle so that you can do the conversion on your contribution, and you may accrue a small amount of interest in the meantime. In this case, the taxes on that accrual are going to be negligible, if any. Just convert the entire amount when you make the transfer to your Roth IRA and report it accordingly on your tax form. If the tax is less than a dollar, which it could be, it may not even show up.


If you mistake of converting just your original contribution and there's now a minimal balance in the traditional IRA, just do the conversion again and pay the (again, likely negligible) tax.



What happens if the conversion doesn't happen until the next calendar year due to delays by the brokerage account or me forgetting to do it?


Let’s say you made your after-tax contribution to your traditional IRA on December 29th, 2025 but weren’t able to complete the conversion until January 3rd, 2026. Your contribution will count for the 2025 annual contribution limit, but any taxes generated will count toward your 2026 tax return.


If you don’t have any pre-tax funds in your IRAs, the only taxes you might have to pay would be on the gains earned during that short period between December 29th and January 3rd when the conversion completes.


To account for this, you would include your contribution on your 2025 IRS Form 8606 Line 1. You would then carry over the amount on Line 14 of your 2025 Form 8606 to Line 2 of your 2026 Form 8606.


If you just forgot to do it for a few months, unfortunately you may be out of luck if there are significant gains on the account, and you'd just have to pay those taxes.



Can I do a Backdoor Roth IRA every year?


Yes, so long as the Backdoor Roth IRA option remains available and you're eligible to contribute to an IRA, you can do a Backdoor Roth annually.



Are Backdoor Roth IRAs going away?


While there have been periodic discussions about eliminating this strategy, Backdoor Roths remain legal under current laws. We don't have a crystal ball to predict what might happen in the future, and tax laws can change, so it's important to stay informed and coordinate with a tax professional. If you haven't already, sign up for our PSG weekly newsletter for alerts on important tax changes that impact doctors.



What happens if I funded a Roth IRA and then found out I made too much, or I mistakenly contributed to the Roth IRA directly first?


If you contributed to a Roth IRA and your income ended up exceeding the contribution eligibility limit, you have to do what is called a recharacterization. This process takes your Roth IRA contribution and recharacterizes it as a traditional IRA contribution.


A recharacterization must be completed before your tax-filing deadline, though the IRS generally includes extensions when dealing with recharacterizations (so you may have up to October 15th) versus the April date for contributions.


The brokerage company your IRA is with can help you through the process with a simple phone call or by filling out a form on their website. Thankfully, it’s a pretty easy process.


From the IRS’s perspective, as long as this is done before filing your taxes, they’ll only see it as a traditional IRA contribution. It will be like you never put it into the Roth IRA in the first place. You won’t report the recharacterization, you will report on your taxes as if you made the contribution to the traditional IRA.


Presumably, at this point, you will want to take advantage of the backdoor Roth instead of leaving the money in the traditional IRA. Then the process is similar to the one highlighted above. To keep taxes minimal, we recommended converting it to a Backdoor Roth ASAP.


What happens if I funded a Roth IRA and then found out I made too much? Overview of Roth recharacterization


Is a Backdoor Roth IRA right for me?


This is hard to answer conclusively, as a Backdoor Roth IRA isn't perfect for everyone. While it can be a great tax strategy for high-income earners, it may not be the best idea if:

  • You have large pre-tax IRA balances

  • You're getting close to retirement and expect to be in a much lower tax bracket then


A financial advisor can help you develop a comprehensive financial plan based on your specific goals, which can help you decide if the Backdoor Roth IRA strategy is right for you.



Additional resources for doctors


Visit our accountant database and financial advisor database if you need help assessing your specific tax strategy and potential tax implications of a Backdoor Roth IRA.


Sign up for our PSG weekly newsletter for alerts on related educational content and free webinars.


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