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Level 3
posted May 31, 2019 6:15:22 PM

I have an IRA that has $ from a 401K rollover, non-deductible contribs & gains. How is this treated if I withdraw $ since part of the $ have been taxed and part have not.

I have an IRA that includes money from a 401K rollover ($25K),  non-deductible contributions ($65K) and gains ($100K) for a total of $190K.  Also, I moved the account between brokers so the current broker does not have the full history.   If I were to withdraw $20K, how will this be reported since $65K has already been taxed?

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1 Best answer
Level 15
May 31, 2019 6:15:23 PM

The broker history makes no difference.   The non-deductible contribution should have been reported to the IRS with a 8606 form each year that a non-deductible contribution was made.

When you take a distribution you will get a 1099-R form.  Enter the form into the 1099-R section in TurboTax and answer the follow-up questions that ask about the non-deductible "basis" and the total last years end value of all Traditional IRA accounts.

The taxable and non-taxable portion of the distribution will be automatically calculated on a 8606 form that prorates the non-deductible amount between the total IRA value and the current years distribution.   Your $65K non-deductible is about 34% of the total value of $190K (if that was the total value of *all* Traditional IRS's), so about 34% of the distribution of $20K, or $6,800 would not be taxable and $13,200 would be taxable.  (This is just rough - the actual calculations can be seen on lines 19-25 on the 8606 form.)   You can never withdraw only the non-deductible part - it is always prorated over the total value.

3 Replies
Level 15
May 31, 2019 6:15:23 PM

The broker history makes no difference.   The non-deductible contribution should have been reported to the IRS with a 8606 form each year that a non-deductible contribution was made.

When you take a distribution you will get a 1099-R form.  Enter the form into the 1099-R section in TurboTax and answer the follow-up questions that ask about the non-deductible "basis" and the total last years end value of all Traditional IRA accounts.

The taxable and non-taxable portion of the distribution will be automatically calculated on a 8606 form that prorates the non-deductible amount between the total IRA value and the current years distribution.   Your $65K non-deductible is about 34% of the total value of $190K (if that was the total value of *all* Traditional IRS's), so about 34% of the distribution of $20K, or $6,800 would not be taxable and $13,200 would be taxable.  (This is just rough - the actual calculations can be seen on lines 19-25 on the 8606 form.)   You can never withdraw only the non-deductible part - it is always prorated over the total value.

Level 15
May 31, 2019 6:15:26 PM

I misread the $65K non-deductible as $25K so I edited my answer to use the $65K figure.

Level 3
May 31, 2019 6:15:28 PM

Thanks very much.