The pro-rata rule affects backdoor Roth conversions. What does it require the IRS to consider?

The pro-rata rule means the IRS treats all your Traditional, SEP, and SIMPLE IRA balances as one combined pool when calculating how much of a conversion is taxable. If you have $90,000 in pre-tax IRAs and make a $10,000 nondeductible contribution, only 10% of any conversion is considered after-tax and tax-free. This is why many advisors recommend rolling pre-tax IRA balances into a current employer 401(k) before attempting the backdoor strategy.