Build an IRA Account Inventory Before a Roth Conversion

Executive summary

A useful pro-rata calculation begins with an account inventory, not with the balance of the IRA you intend to convert. The inventory connects each account to its owner, tax type, December 31 evidence and any unfinished transfer. This guide builds a practical worksheet for that process and shows how one omitted rollover IRA can change a conversion estimate even when the newly opened contribution account has been emptied.

Educational guidance for ordinary scenarios. Check the official form's year and filing branches and obtain advice for your actual records.

Make ownership the first column

List the legal owner before the custodian or account nickname. Married taxpayers do not combine their individually owned IRA pools simply because they file a joint return. A spouse's basis history belongs with that spouse's accounts and Form 8606. Inherited IRAs also need a separate classification rather than being silently added to the ordinary owned-IRA calculation. An account called family retirement or household rollover can conceal this distinction if the worksheet starts with nicknames instead of ownership.

Use an abbreviated identifier that you can match to your statements without entering a full account number in the website. A row such as Owner A, custodian B, account ending 1234 is enough for a personal inventory; even that identifier is unnecessary in a public support example. Keep sensitive originals in your own records. For a preparer discussion, provide the actual statements through the preparer's appropriate channel rather than attaching them to a website feedback email.

Classify tax type separately from the brokerage label

For the ordinary owned-IRA analysis, identify traditional IRAs, traditional SEP IRAs and traditional SIMPLE IRAs. A rollover IRA is usually a traditional IRA classification rather than a separate exemption from aggregation. Roth IRA balances are not inserted into the traditional IRA denominator merely because the same broker displays them nearby. Employer plans that remain in the plan are also different from owned traditional IRAs. An employer-plan distribution moved into a traditional IRA can change that classification before year end.

Ask for clarification if a statement uses a mixed or unfamiliar label. Roth employer IRAs, inherited accounts and after-tax employer-plan money require care that a generic nickname cannot provide. Keep a classification note with its source: account agreement, custodian confirmation or preparer explanation. The goal is not to force every account into a calculator field. It is to identify which facts fit the ordinary model and which require a separate question before a number is treated as meaningful.

Worked inventory: the empty conversion account is only one row

Assume one owner has documented prior basis of $6,000, converts $6,000 during 2025 and has no other distributions or adjustments. The newly used contribution IRA is empty at December 31, but an older traditional rollover IRA holds $18,000. A Roth IRA and an employer 401(k) remain outside the traditional IRA pool in this ordinary example. The table separates account classification from the final arithmetic instead of relying on the conversion account alone.

Allocation using the complete $18,000 IRA inventory

This invented example assumes one taxpayer, documented basis, eligible ordinary transactions, no special repayment and no tax withholding. Dollar amounts are planning values. Use the official form's filing branches; a displayed line is not automatically a required entry on a filed return. The 2026 examples apply published 2026 contribution limits with the 2025 allocation structure.

Attach a year-end evidence date to each value

Use the applicable December 31 value, not the account's value on the conversion request date or the day you happen to open the calculator. A current online balance may reflect later deposits, withdrawals or market movement. Save the annual statement or other appropriate year-end evidence and note the date it describes. If an account moved between custodians, identify which institution's record documents the year-end asset rather than including the same transferred assets twice.

Add a status column for requested, completed and outstanding transactions. Money distributed before year end and properly rolled over afterward may require an outstanding-rollover adjustment even when no broker shows it in a December 31 account balance. Conversely, an internal trade within the same IRA does not create a second IRA balance. Explain each adjustment in a separate note so that a reviewer can reconstruct the denominator without guessing why it differs from a screenshot of the brokerage dashboard.

Reconcile flows as well as balances

An inventory of ending accounts does not replace the transaction list. Gather the year's relevant conversions, other distributions, regular contributions and any contributions designated for an earlier tax year. The ordinary denominator includes covered distribution flows as well as the applicable ending value. A zero ending balance does not mean there was no IRA activity. Keeping a flow ledger next to the inventory prevents an emptied account from disappearing from the annual explanation.

Use a transfer reference to connect the outgoing and incoming sides of the same movement. A trustee transfer between owned traditional IRAs should not be counted as two independent distributions merely because two statements show activity. A conversion, an indirect rollover and a returned contribution are different transactions and may receive different reporting. If the classification remains uncertain, retain the source confirmations and ask the custodian or preparer to identify the event before totaling a generic distribution field.

Test the effect of one missing account

In the invented inventory above, omitting the $18,000 rollover IRA would produce a $6,000 denominator against $6,000 basis and suggest a fully tax-free conversion. Including the missing IRA produces a $24,000 denominator and a 25% tax-free proportion. The $6,000 conversion then uses $1,500 basis, includes $4,500 taxable income and leaves $4,500 basis. The arithmetic did not change; the incomplete inventory changed the facts supplied to it.

Use that comparison as an audit technique. Ask whether each account has been intentionally included, intentionally excluded with a reason, or left unresolved. A blank row should not silently become zero. Keep market value, basis and contribution amount in separate columns, because they answer different questions. If someone else prepares the return, show the account-classification worksheet alongside the proposed calculation so the reviewer can challenge an exclusion before the return is filed.

Finish with an inventory sign-off checklist

For each owner, confirm that every relevant custodian is represented, account types are classified, year-end values have dated evidence and unfinished rollovers have been reviewed. Reconcile conversions and other distributions to the annual transaction list. Then reconcile opening basis to the last supported carryforward and identify current nondeductible contributions separately. This sequence produces an evidence trail from documents to inputs instead of a collection of unrelated numbers typed into a form.

Update the inventory when a job change, rollover, account closure or new employer IRA changes the facts. Keep earlier versions with a clear year label rather than overwriting the record used for a filed return. The calculator can show a supported allocation after these inputs are complete; it cannot discover an account that you forgot to list. Treat a finished inventory as preparation for a source-based review, and keep inherited, special repayment or restricted SIMPLE situations outside an ordinary definitive result until resolved.

About the publisher: Moss Ladder

Moss Ladder owns and publishes RothProRata.com, an independent educational website about IRA basis, Roth conversions and Form 8606. The guides connect official sources with invented examples, document checklists and browser-local planning tools.

AI-assisted tools help prepare explanations and software. Numerical allocation examples state their assumptions and are checked with automated calculations. These engineering checks do not constitute independent CPA or Enrolled Agent review, and no professional tax credential is claimed.

Official sources

Source year and transaction type matter. Citations support the explanation; they do not imply government endorsement.

• U.S. Code (2024 edition): IRC § 408(d)(2) aggregation and § 408(d)(3) rollovers
• IRS: 2025 Form 8606, Parts I and II
• IRS: 2025 Form 8606 instructions (basis, year-end values and conversions)
• IRS: Publication 590-A (2025), contributions and rollovers
• IRS: Publication 590-B (2025), distributions and Roth five-year rules

Continue learning

• How the IRS Pro-Rata Rule Works: IRC § 408(d)(2) and Form 8606
• The December 31 IRA Balance Rule and Timing Trap
• Reconcile Forms 1099-R, 5498 and 8606 Before Filing