Hello community,
I have a question regarding a traditional IRA account that I own, and the tax implications of investing and moving money within or out of it.
The IRA’s ‘seed money’ of $1,000 was invested by my parents as a gift to me a long time ago. He invested it with a wealth management company who put it into a mutual fund where it stayed untouched for years. The dividends, as far as I can tell, were not reinvested, but placed into an insured cash account.
I didn’t know anything about investing and more or less forgot about the account. The only contribution I ever made was a deposit of $1000 from my savings. The wealth management company put this into the insured cash account. I deducted it on my taxes at the time, but now I think I made a mistake because that was after-tax money. I didn’t file the 8606 or any other IRS form to report a non-deductible contribution.
I very recently transferred this IRA account to another custodian and sold the existing mutual fund. I would now like to reinvest that money, ideally by either (1) pooling the money from the old insured cash account and mutual fund sale and buying a new mutual fund, or (2) rolling the money over into my Roth IRA. However, after doing some reading I’m confused about the tax implications of what I think was a mistake with my deposit, and I’m unsure about the best course of action. Any advice you can give would be much appreciated.
