Hello:
I am currently self employed and have been for a few years. I am currently structured as an LLC S-Corp. Before I became self employed I worked for many years as an employee for several companies and have contributed to traditional IRA plans.
I see that TT has prompted me about making a contribution to my traditional IRA account. My question is this: Wouldn't such a contribution in fact be a after-tax contribution made to a pre-tax account, such as my traditional IRA? And if so, how does the tax implication work? If I were to continue being self employed for the next ten years and each year I contribute say $1000 to my traditional IRA account, then I retire and it becomes time to start taping into the traditional IRA account, how does the IRS figure out the amount of my traditional IRA account that is a considered pre-tax vs the amount that is considered post-tax? Or is this something I have to keep a record of. Can you please explain the tax implication of making a after tax contribution to a traditional IRA account? Thank you for your time.
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If you make after-tax contributions to your traditional IRA, you must report them on a Form 8606- this will have your current year and total nondeductible contributions. When you take money out of the account, the amount of your nondeductible contributions will not be taxed.
Because you are self-employed, there are some tax favored ways to work on your retirement- see A Tax Guide for Solopreneurs: Self-Employed Tax if you do not have employees.
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