What IRA Documents Do I Keep?

[roxieroo444]

My husband & I have retired and will start taking distributions from our IRAs.  We have both TraditionaI and Roth IRAs that include conversions, recharacterizations, transfers, non-deductible Traditional IRA contributions, and 401k rollovers.  I have boxes of 5498s, investment statements, and tax returns that I would like to pare down and simplify life.  What records do I need to keep?

Thank You

[Opus 17]

For future income taxes, you don’t need to know anything about your traditional IRAs except the balance.  All withdrawals are non-taxable.  

For Roth IRAs, you need to keep track of direct contributions and rollovers/conversions if you are under age 59-1/2, because that can affect taxability of withdrawals.  Over that age, the withdrawals are all non-taxable no matter what “class” of money they represent.  

In general, I would keep all tax-related documents for 7 years.  It would not hurt to keep just the tax returns for longer, if you have ever filed form 8606 or 5329.  

[dmertz]

You must always keep at least the Form 8606 that each of you most recently filed that correctly shows basis in nondeductible traditional IRA contributions.

[roxieroo444]

Thank you for your quick response.  Please clarify as I am a novice here.  Since we are both over 59 ½, for IRS purposes I don’t need to keep any records except our tax returns?  And I have filed 8606s so keep the returns from the first year filed forward?  

If we were to get audited are the 1099-Rs, 8606s, and 7+ years of returns enough for the IRS?

Do I need to keep the 5498s or investment statements?   Thanks Again

[Opus 17]

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@roxieroo444 wrote:

Thank you for your quick response.  Please clarify as I am a novice here.  Since we are both over 59 ½, for IRS purposes I don’t need to keep any records except our tax returns?  And I have filed 8606s so keep the returns from the first year filed forward?  

If we were to get audited are the 1099-Rs, 8606s, and 7+ years of returns enough for the IRS?

Do I need to keep the 5498s or investment statements?   Thanks Again

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First let me correct my previous response because I missed something that @dmertz  pointed out.

For traditional IRAs when you have non-deductible contributions, you need your most recent form 8606, that keeps track of your non-deductible basis.  Each year that you withdraw from your IRAs, you use the most recent previous form 8606 to determine your tax, and you will generate a new form 8606 that you will need the next year.  

For Roth IRAs after age 59-1/2, you don't need any other documents.  You need to keep track of direct contributions and rollovers/conversions before age 59-1/2, but after that it doesn't matter.

Regarding the statements that show the performance of your IRAs, you never need them for tax purposes.  The kinds of investments you had and their individual performance numbers don't matter.  Withdrawals from the IRA are taxed as ordinary income no matter how your contributions were invested. 

Regarding performance statements for non-tax deferred investment accounts (if you have any such investments), what you would need for your tax return is the tax statements provided by the broker (1099-B, 1099-DIV, etc.).  The only reason to keep detailed performance records is if you wanted to double-check the broker's figures on the tax statements. 

You don't need the 5498s as long as they agree with your tax returns (in other words, if you took a deduction for $6000 of contributions in 2020, your 2020 form 5498 should match that). 

In general, I would save important tax papers for 7 years.  That includes the tax returns, form 1099 and form 5498.  After 7 years you can discard them, except that you need to keep your most recent form 8606 even if it is more than 7 years old.  The IRS can't audit you after 6 years unless they have evidence of deliberate and substantial fraud.

[roxieroo444]

Thank You - I appreciate your expertise!

[fanfare]

If you have a basis, IRS asks (insists) that you keep ALL form 8606 that you filed, forever, along with the 1040 to show you did not take a deduction for your contribution shown on Form 8606.

IRS says:

"All distributions from your IRA will be taxed unless you can show, with satisfactory
evidence, that nondeductible contributions were made."
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For purposes of recovery of state taxes on  IRA distributions, you need complete records of all contributions and distributions so far.

[roxieroo444]

fanfare - Thank You.  Can you please clarify if this only applies to non-deductible contributions made to Traditional IRAs?  I do have all the returns and 8606s for that.  

I'm confused about Roth IRAs - now that we're retired and can take qualified distributions, do I need to keep any records?

[DianeW777]

Yes, Form 8606 applies to nondeductible contributions.  For Traditional IRAs this is the only real concern for you, so that when you take distribution you are not taxed on this cost in your IRA (amounts you were never able to deduct which became 'after-tax' contributions).

Roth IRA contributions were never able to be deducted, and therefore all of the contributions are 'after-tax'.  There is no recordkeeping once you reach retirement age because all distributions, including earnings, is tax free.