I am single and have no dependents, am in my late 20s, and I made an income in 2019 that lies somewhere inside the phase-out section of direct contributions to a Roth IRA. I do not think I have any adjustments to make for AGI and MAGI. I have about $2500 in a traditional IRA.
My plan is to convert that $2500 to the Roth IRA to avoid the pro-rata rule. It sounds like I have to apply that to 2020 taxes.
At that point, does it make sense, for 2019, to contribute a non-deducted $6000 to my traditional IRA and convert the money to the Roth? It seems like an extra pain to directly contribute some funds and backdoor the rest.
There seems to be a gray area with the step transaction doctrine. I understand there has been some guidance in the past couple years that seems to explicitly give the OK for this procedure, but should I wait several days anyway after contributing to the traditional IRA before I convert to the Roth? I was hoping to purchase an index fund on Friday with the money.
And if I instead move the $2500 to my 401k and only convert the $6000, does my 5 year clock for the Roth IRA start in 2019?