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January 5, 2018

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


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.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.


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