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Level 1

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

I am 60 and started taking distributions from an old IRA that had no growth for several years.  Since our income has decreased due to illness, it was decided to liquidate this particular IRA.  I have 3 others, two are rollovers when I medically retired from my job and 1 I started just to have a future income.  I had a stroke so if things look scattered they probably are.  The problem that i am having is what do I need to report.  I took distributions from my old IRA that had some rollover funds, and some reportable and non-reportable funds.  When I am completing the turbo tax input the section where I reported my distributions also wants the fair market value of my IRA's.  When I enter the amount on the 5498 for the IRA with the mixed funds my tax refund is reduced by more than $600, if I include the estimated fair market value of all my IRA's (no 5498's for the other three IRA's yet) it goes down by more than $900.  I am confused.  My IRA was roughly $27,000 and $6,040 is non-deductable contributions. Am I being penalized or what?  I am very confused by this process.  We do not have the money to pay a tax preparer and really need the money from this return so hope someone can assist.

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Level 18

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

it's very simple, all your Traditional, SEP and SIMPLE IRAs have to be lumped together and the value of each added together for a grand total  year end value. ( I suggest you get the numbers from your December statements). There is no estimating. Use the value on Dec 31.

It sounds like you don't have SEP or SIMPLE IRAs, just traditional.

If you closed one in 2017, that one's contribution to the total is zero.

Tell TurboTax  your basis of $6040. and what you took out during 2017 (that's your 1099-R) . TurboTax will do the calculations on Form 8606 for you.

14 Replies
Level 18

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

it's very simple, all your Traditional, SEP and SIMPLE IRAs have to be lumped together and the value of each added together for a grand total  year end value. ( I suggest you get the numbers from your December statements). There is no estimating. Use the value on Dec 31.

It sounds like you don't have SEP or SIMPLE IRAs, just traditional.

If you closed one in 2017, that one's contribution to the total is zero.

Tell TurboTax  your basis of $6040. and what you took out during 2017 (that's your 1099-R) . TurboTax will do the calculations on Form 8606 for you.

Level 1

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

I guess I don't understand. Why am I being what appears to be penalized for taking a distribution when I am over 59 and a half years old and I'm paying taxes on that distribution and TurboTax is only calculating a small portion of the basis.  Now I am to forfeit an additional $900+ in what I would have received as a tax refund.  I am only liquidating the mixed up IRA over two years.  The other IRA's are being left as is.  Does this mean every year from now on I will be penalized when I report the market value of my IRA's?  What is the benefit of an IRA when they have made no or little interest and now I am double taxed when I liquidate a piddly IRA?   This is frustrating. We really need the tax refund.
Level 20

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

Under the law, all of your traditional IRAs are treaded as one large IRA account for the purpose of calculating the taxable amount of any regular IRA distribution.  You are not being penalized for any portion of your 2017 distribution.  It's simply the case that a larger portion of the distribution is taxable than you thought because less of your basis in nondeductible traditional IRA contributions than you thought is applicable to this distribution.

You are not forfeiting any portion of your basis that is not permitted to be applied to your 2017 distribution.  Any portion that cannot be applied to your 2017 traditional IRA distributions remains with your IRAs in aggregate to be reduce to the taxable amounts of future IRA distributions.  You'll always have some basis in nondeductible traditional IRA contributions until you have a zero balance in all of your traditional IRA accounts at year end.
Level 1

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

I'm not sure anybody is understanding my frustration. If I don't report the market value which I've never had to do apparently until I guess now since I'm taking a distribution I would get a whopping $2,400 back in taxes.  If I report the fair market value of all the IRA's which isn't even a hundred and fifty thousand my tax return decreases to $1,500. My retirement and my husband's income is well under a hundred thousand. I only took 15000 in distribution and that includes taxes.
The way I'm seeing this is somehow I'm being  levied an additional tax on everything that's in my IRA's plus I'm being taxed on the distribution less the basis.
Level 1

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

So next year when I file are they going to tax my market value again which goes up and down like the wind. Like the IRA I'm taking a distribution from which has made negative dollars over the past 6 years. So essentially I lose any interest I may have earned on this lousy account. What is the point of an IRA if you're going to be taxed twice or more times. That is the only pension my husband will get from the lousy company he works for. why should we bother. It would be cheaper to go on welfare
Level 20

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

Make sure that you are including *only* IRA balances in the total, and are *not* including balances that were in 401(a), 401(k), 403(b) or 457(b) plans on December 31, 2017.  These types of plans are *not* IRAs.

If these are truly all IRAs, it's unfortunate that you misunderstood the tax consequences of the distribution when you made the distribution, but that doesn't change the required calculation.  You are not going to be taxed twice on any of this money.  You are simply being taxed on it now rather than later.
Level 1

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

So when I report my taxes next year and have to put the fair market value of my IRA's in again are they going to tax me again for the same money?
Are they going to give me money back when my IRA Investments lose money, which they've done over the years. The other IRA'S were originally 401k's.

Do I have to report my husband's little IRA too?
Level 1

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

I thought once you turn 59 and a half there were no penalties for taking Distribution on your IRA.
Level 1

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

I guess all taxpayers should be warned that if they're not rich and their little IRAs are going to be taxed to the hilt they're better off not having them.
Especially when your health fails you early and you're not allowed to work unless you want to give 50% of your income back to the government.  I thought this was the purpose of our IRAs was to get us through the hard times and supplement our income when we're forced to retire when we're not ready .
Level 20

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

As I said, none of this causes you to be taxed more than once on the same money.  Because higher IRA balances mean that more is taxable now, it also means that less of your future distributions will be taxable later.

Your unexpectedly small refund is due to an unexpected amount of ordinary income taxes, not penalties.

The benefits or drawbacks of deferring income by contributing to a retirement account are different for every individual.  To some extent it depends on whether you expect to be in a higher, lower or the same tax bracket in retirement than during the earning years.  With the recent reduction in the tax-bracket rates, the benefits of having deferred income to future years have increased.  However, because distributions from retirement accounts are taxed as ordinary income, an argument can be made for investing in capital investments outside of a traditional retirement account rather than in a traditional retirement account to obtain taxation of gains at more favorable long-term capital gains rates.  It's the job of financial planners to help you navigate these trade-offs (although some financial planners are better than others at doing so).  Because the taxability of Social Security income can depend on the amount of your other taxable income, the years prior to beginning to receive Social Security income are especially important for planning how you will take your distributions from your retirement accounts to minimize the tax consequences.
Level 1

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

Thank you for your help. Do I have to report my husband's IRA as well?
Level 18

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

A $15000 distribution, in the 15% tax bracket would result in a tax of $2,250, If your bracket is higher, your tax is still higher. The factor generated by your total IRA value is only helping you not hurting you, since your basis reduction is not taxable.
Your IRA and his are treated separately, for purposes of Form 8606, and your distribution, include only your own IRAs.
That's one of the "surprises" for IRA retirees, the taxes are high !
Level 18

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

If your IRAs have not grown over the years, but lost money, you need to find a new investment approach immediately.
Level 20

I have 4 IRA's, My first one that had both reportable and non-reportable contributions. I am 60 and taking distributions, I have a question about the fair market value

Your IRAs are aggregated only with your IRAs and your husband's IRAs are aggregated only with your husband's IRAs.