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January 5, 2018

Who is responsible for tracking after-tax amounts in IRAs?

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Who is responsible for tracking after-tax amounts in IRAs?

My client has had some after-tax amounts in her traditional IRA from nondeductible contributions. However, when her IRA custodian reported her distribution, they reported the entire amount as taxable. I know that is not the case, but they refuse to make any corrections. How can she get them to fix this?

IRA custodians are required to report regular distributions from traditional IRAs as fully taxable. Therefore, the IRA custodian is not required to make any corrections. However, her tax-preparer is required to file IRS Form 8606, Nondeductible IRAs to report the after-tax portion of her distribution. IRS Form 8606, Nondeductible IRAs includes a built-in formula that will help the tax-preparer calculate the nontaxable portion, and communicate the information to the IRS.

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Catch-up Contribution

Definition An additional contribution that can be made to a retirement plan by a participant who is at least age-50 by the end of the

Salary Deferral Contribution

Definition A contribution made pursuant to a participant’s election to have a portion of his/her salary/wages  contributed to his/ her employer sponsored plan  rather than

Key Employee

Definition An employee who, at any time during the plan year, is (i) an officer of the employer having an annual compensation greater than $180,000,

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