The purpose of first contributing to the traditional IRA and then converting to a roth IRA is so that you can indirectly contribute to Roth IRA even though your AGI is greater than what is allowed to directly open a Roth.
If you first contributed to a traditional IRA, did nothing with that amount, and then converted it to a Roth IRA, you are indirectly funding a Roth IRA, and futhermore, if you follow certain rules, you wouldn’t have a taxable event do the conversion.
Normally, when you do a traditional IRA to Roth IRA, you must pay taxes on your IRA distribution. But since your contribution to your traditional IRA was with after tax dollars, and since you won’t have any capital gains on it before you converted it to a Roth IRA, there is no tax event. There are certain specific rules you must follow to do this. It’s known as the “pro-rata” rules that you must follow to make sure it’s not a taxable event when you convert from Traditional to Roth IRA.
I believe the most important part of this rule is that you don’t have any other IRA accounts elsewhere, or this won’t work. (Previous 401k accounts, are ok since the IRS treats IRA’s and 401ks differently. So you generally should not rollover old 401k accounts into rollover IRA’s unless your previous employer doesn’t allow you to keep the 401k account OR the fund selection/plan of your previous employer sucks)
Details of backdoor Roth IRA are found here. And as usual, talk to a CPA, since I’m no accountant, and I probably oversimplified things and probably omitted important details for you to get this to work. I’m just giving you the idea of what could be done. Viability and Implementation details are left as an exercise for the reader.
