I have multiple IRA accounts, Traditional, Rollovers, Roths (with conversions), 401ks, etc. over many years.
One of my rollovers was from a 401k that includes after tax contributions.
As an example, assume I have the following:
Traditional: 10k contributions, 15k end 2018 value (after 4k distribution)
Rollover 1: 10k value at time of rollover (100% pre-tax in 401k), 14k end 2018 value
Rollover 2: 12k value at time of rollover (10k pre-tax, 2k after tax), 16k end 2018 value
Roth: 10k contributions, 18k end 2018 value
In 2018 had distribution of 4k out of Traditional (towards son's college tuition).
How do I determine my basis, for reporting against the distribution I took?
Hi. Yes, I eventually figured it out.
I guess one of the things that was throwing me was the term "nondeductible", because to me that means ROTH IRA, even though the description may be in the "traditional" section. With the tax rules so complicated, it would be nice to have more explicitly worded the nondeductible part of the traditional IRA.
Plus, conversions and such, I'd love to have some flow diagrams showing this instead of lots and lots of text. :(
Thank you for your help. It gave me the boost I needed to figure this out.
The "almost always" answer: When you have a distribution from a Traditional IRA (or 401(k)) it is treated as income; you don't get to deduct any basis from the withdrawl. There's a wrinkle: If you made non-deductible IRA contributions, the distributions may be only partly taxable: https://www.irs.gov/publications/p590b#en_US_2018_publink[phone number removed]
Whoops, the web form removed part of the link, which it thought was a phone number! Click on the link and then search for: "Distributions Fully or Partly Taxable"
Thanks for responding.
I've read through that section of the IRS documentation many times and it still isn't clear.
Can/Should I increase the basis because of the non-deductible part of the IRA that was a 401k rollover, or is the basis ONLY within the IRA from which I took the distribution?
did you complete Form 8606? did you do that each year that you had a distribution / rollover out of the IRA?
2018 is the first year I've had a distribution. I haven't filled out Form 8606 for 2018 (yet).
I have two Form 8606 forms, in 2002 and 2010. Those were years in which I did Traditional-to-Roth conversions.
so doesn't filling out Form 8606 answer the questions you are posing?
technically, this is the 3rd 'distribution'...even though you did Roth conversions twice, those are IRA distributions also
Hi. Yes, I eventually figured it out.
I guess one of the things that was throwing me was the term "nondeductible", because to me that means ROTH IRA, even though the description may be in the "traditional" section. With the tax rules so complicated, it would be nice to have more explicitly worded the nondeductible part of the traditional IRA.
Plus, conversions and such, I'd love to have some flow diagrams showing this instead of lots and lots of text. :(
Thank you for your help. It gave me the boost I needed to figure this out.
Should I included Annuitized IRAs in my total IRA Basis calculation for Form 8606?
A qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. If in 2024 you had a deemed IRA, use the rules for either a traditional IRA or a Roth IRA depending on which type it was.
Here's more info on Form 8606 and IRS Instructions.