topic Required Minimum Distribution (RMD) in Get your taxes done using TurboTax

Required Minimum Distribution (RMD)

Suzham — Fri, 27 Dec 2024 19:14:54 GMT

I have a Traditional IRA and must begin withdrawal soon. In the past I made one AFTER TAX contribution, which now must be accounted for in my taxes by TurboTax. My broker will give me my RMD, but what is the best way to handle the AFTER TAX amount?

I did not take a deduction for the AFTER TAX contribution the year I made it.

Do I pull out the AFTER TAX part first, last, or incrementally?

Will TurboTax prompt me for AFTER TAX contribution?

Re: Required Minimum Distribution (RMD)

ThomasM125 — Mon, 13 Jan 2025 18:47:59 GMT

You must take out the after-tax contributions incrementally. Turbo tax will ask you for the amount of any nondeductible contributions to your retirement account when you enter the Form 1099-R reporting your retirement plan distributions during the year.

The distribution of your non-taxable contributions will be treated as non-taxable on a pro-rata basis. You cannot simply consider a portion of distributions as a return of the post-tax contributions you made. The non-taxable portion of your distributions will be the post-tax amount contributed divided by the total value of your IRA account balance multiplied by your total distributions for the year. You will have to treat a portion of current and future distributions from your IRA as non-taxable, based on the percentage of non-deductible contributions you made, until you have distributed all of the retirement fund balance. Your broker may or may not determine the non-taxable amount when issuing your form 1099-R at year-end. If the broker does not report it, you are responsible for calculating and reporting the correct amount of non-taxable distributions on your tax return.

Re: Required Minimum Distribution (RMD)

Opus 17 — Mon, 13 Jan 2025 18:55:38 GMT

Do you have the form 8606 from when you made the non-deductible contribution?

If not, then you pay tax on the entire withdrawal. You need to have saved the form 8606 to prove that you made a non-deductible contribution. You get a new form any year that you make a non-deductible contribution, or do a Roth conversion, or withdraw from a Roth. The information carries over and you need the most recent form 8606 even if it was a long time ago. Without it, you can't prove the non-deductible contribution and everything will be taxed (the IRS doesn't keep track for you.) The IRS may have your tax returns including any form 8606 going back up to 10 year, but not farther.

https://www.irs.gov/individuals/get-transcript

If you have the form 8606, the you will use it to report the withdrawal. You must withdraw and pay tax proportionately. For example,if 2% of the balance is your prior non-deductible contribution, then 2% of the withdrawal is not taxable, and your non-deductible basis is slightly reduced. You will get a new form 8606 as part of your tax return that you will use the following year to keep track of your after-tax basis, and so on into the future until all the funds are withdrawn and taxed or converted to a Roth and taxed.