I have a SEP-IRA from my consulting years, many years ago (I haven't contributed to it in years but it does have a balance).

I wanted to setup a backdoor Roth IRA conversion by creating Traditional IRA and Roth IRA accounts, transferring the $6k max to the traditional, and then doing the backdoor conversion to the Roth IRA. I've gotten as far as putting the $6k into the traditional IRA and I saw this article:


It claims:

..there exists one important prerequisite to be able to properly execute the backdoor Roth.

You cannot have tax-deferred money in an IRA in your name.

That includes traditional IRA, SEP IRA, and SIMPLE IRA

So now I'm worried that I'm doing it wrong, since I have funds in the SEP-IRA (more than the 6k). Is this issue only if I've made contributions to the SEP-IRA this year?

If that's a problem, is it too late to perhaps roll the SEP-IRA into my 401k? Or if I can't do that and it's impossible for me to do a backdoor Roth, how do I back out of all of this? Can I just return the money from the traditional IRA back to my bank and simply do no IRA contributions this year?

A clarification based on the answer below. Here are my accounts:

  • SEP-IRA: Funds from previous years (no contributions this year)
  • Trad IRA: $6000, contributed post-taxes this year, waiting for conversion
  • Roth IRA: $0, waiting for the conversion

1 Answer 1


This issue is not only if you have contributed to the SEP IRA this year. If you have existing pre-tax funds in SEP IRA, it will get mixed with after-tax funds you contribute into Traditional IRA, and if you convert to Roth IRA you will be converting a mixture.

It is not too late to rollover the pre-tax money from SEP IRA to your 401k. As long as you do the rollover before the end of the year that you make the conversion, you're fine. i.e. if you convert to Roth IRA in 2020, you need to have rolled over the pre-tax funds to 401k before the end of 2020. Or if you wait until 2021 to do the conversion, then as long as you rollover the pre-tax funds to 401k before the end of 2021, it is fine.

The pro-rata rule is calculated in Form 8606. The forms asks about the basis (after-tax amount) in your Traditional/SEP/SIMPLE IRA, the value of your Traditional/SEP/SIMPLE IRA on December 31 of the year, and the amounts you distributed from Traditional/SEP/SIMPLE IRA and converted to Roth IRA. Any amounts that you rolled over into 401k before the end of the year won't be counted in any of them, and won't be considered in the pro-rata rule.

  • I am pretty sure it sounds like everything is okay, though you're talking about me stilling rolling money from SEP->401k, so I clarified that I have three accounts above (the end of my question). Presumably I don't have to worry about my SEP at all and can leave the money there and just do the trad->Roth conversion?
    – D Stellar
    Commented Dec 21, 2020 at 18:55
  • @DavidLjungMadisonStellar: I already understood when I wrote the answer that you had money in your that SEP IRA contributed from previous years, and you are using your Traditional IRA for the backdoor Roth IRA contribution. The pro-rata rule considers amounts in Traditional IRA and SEP IRA together, regardless of the fact that they are in separate accounts. So, like I said, if you don't rollover the pre-tax funds out of the SEP IRA into 401k, they will be mixed with after-tax funds that you contribute into the Traditional IRA. So you cannot just leave the money in your SEP IRA.
    – user102008
    Commented Dec 21, 2020 at 19:36
  • Got it - I just looked at how Form 8606 is calculated and can see how I'd want to clear out the SEP-IRA. So now I have to figure out the consequences of moving my SEP-IRA balance into my work 401k, but that's another question. :)
    – D Stellar
    Commented Dec 23, 2020 at 3:31

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