Do I need to report company contribution to SEP IRA on form 8606, line 6?

[yfegade]

I work for a S-Corp and the company is contributing to my SEP IRA. I don't contribute any amount to that SEP IRA from my income.

My question is - IRS Form 8606, line 6 asks total value of all traditional, SEP, and SIMPLE IRAs as of
December 31, 2018. Does that include company contributions to my SEP IRA?

[macuser_22]

That is the December 31 market value that should be on the year end statement form the financial institution  that holds the account - that would be the amount of money that you would receive if you cashed in the entire account on that date.   That information is only required if you had a distribution and you have a non-deductible "basis" so the taxable amount can be calculated.

You don't manually fill out a 8606 form, TurboTax does it when you enter a 1099-R distribution from a IRA with basis.

[yfegade]

I thought distributions from SEP IRA are reported on line 7. My question about line 6.

[macuser_22]

Line 6 is what my answer was for.  The total value of all Traditional, SEP and SIMPLE IRA accounts as of December 31.   That is the aggregate market value of those accounts as of that date.

[yfegade]

Do company funded SEP IRA value go into line 6?

[macuser_22 · Accepted solution]

 It it the year end *value* of your account.  Who funded it is not material.

What are you trying to report?  Do you have a 1099-R for a distribution?

[yfegade]

"Who funded the SEP IRA" was my concern. Thanks for clarifying that it does not matter. Basically, if I got SEP IRA, I got to report it regardless of the source of the funding.

[macuser_22]

Correct.  You *include* it's value on line 6 if you took a distribution form an IRA and have a basis.

The reason for that, in case you don't know is:

You can NEVER withdraw ONLY the nondeductible part (line 3 on the 8606) - it must be prorated over the entire value of ALL Traditional IRA accounts which include SEP and SIMPLE IRA's. (For tax purposes you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together).

For example using rough figures: if you had $60K of nondeductible contributions in an IRA with a total value of $600K (10:1 ratio), then when you take a $60K distribution from any IRA account $6,000 would be nontaxable and $54,000 would be taxable (same 10:1 ratio) , with the remaining $54K of basis staying in the IRA for future distributions. As long as there is any money in the IRA, there will be some basis.

TurboTax will ask for your non-deductible "basis" and then the *Total Value* of *all* Traditional IRA, SEP and SIMPLE accounts as of Dec 31, of the tax year. That is so the prorating of the basis can be properly proportioned between the current years distribution and the remaining IRA value. That is done on the 8606 form lines 6-15.