How to document non-deductible Traditional IRA contributions beyondfiling Form 8606?

Discussion in 'Tax' started by eastcoastguyz, Oct 17, 2008.

  1. When you have a non-deductible Traditional IRA contribution I am aware
    that Form 8606 needs to be filed with the return for that tax year.
    The other comments I see regarding this are to "keep good records".
    What is considered good recording keeping of this? Is keeping a copy
    of the return filed with the Form 8606 the record keeping this refers
    to? What about the brokerage firm where the IRA account resides,
    should they be informed concerning a non-deductible IRA contribution,
    and what do they do with this information? Do they keep track
    deductible and non-deductible IRA contributions on the brokerage
    account statement?

    What happens when the money is taken out at retirement with respect to
    the non-deductible IRA contributions, how are they treated
    differently?

    I have searched about this and the only articles I have been able to
    find that discuss this pertain to some sort of special conversation of
    a Traditional IRA to a Roth IRA in 2010. Thanks!

    Edward

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    eastcoastguyz, Oct 17, 2008
    #1
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  2. In article <>,
    eastcoastguyz <> wrote:
    >When you have a non-deductible Traditional IRA contribution I am aware
    >that Form 8606 needs to be filed with the return for that tax year.
    >The other comments I see regarding this are to "keep good records".
    >What is considered good recording keeping of this? Is keeping a copy
    >of the return filed with the Form 8606 the record keeping this refers
    >to? What about the brokerage firm where the IRA account resides,
    >should they be informed concerning a non-deductible IRA contribution,
    >and what do they do with this information? Do they keep track
    >deductible and non-deductible IRA contributions on the brokerage
    >account statement?


    Some IRA custodians notate the IRA as being a conduit or a rollover
    IRA when the IRA was created via direct rollover from an employer
    plan.

    Other than that, the IRA custodian has no responsibility to know
    if contributions were or were not deducted by you on your tax
    return, so does not track this information. In fact, there is
    a box on Form 1099-R which reports IRA distributions that says
    the IRA custodian is unable to determine the taxable portion
    of the distribution. Except where the custodian does not
    allow Rollover/Conduit IRAs to accept new contributions, the
    custodian should Always check that Unable to Determine box.

    >What happens when the money is taken out at retirement with respect to
    >the non-deductible IRA contributions, how are they treated
    >differently?


    The last form 8606 has the amount of unrecovered nondeductible
    contributions in all your traditional IRA accounts -- it is the
    IRA Tax Basis -- and Form 8606 takes you through a calculation
    that i) finds the amount of your distribution that is not
    taxable, and ii) recalculates your new IRA Tax Basis. So if you
    always save your last 8606 you can use it the next time you
    take an IRA distribution or make a nondeductible contribution
    (or a few other things involving Roth IRAs.)

    --


    ArtKamlet at a o l dot c o m Columbus OH K2PZH

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Arthur Kamlet, Oct 17, 2008
    #2
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  3. eastcoastguyz

    Phil Marti Guest

    Re: How to document non-deductible Traditional IRA contributions beyond filing Form 8606?

    "eastcoastguyz" wrote:

    > When you have a non-deductible Traditional IRA contribution I am aware
    > that Form 8606 needs to be filed with the return for that tax year.
    > The other comments I see regarding this are to "keep good records".
    > What is considered good recording keeping of this?


    Keep a record that the contribution was made. That could be your receipt
    from the custodian, a year-end statement from the custodian, or the Form
    5498 that the custodian issues documenting the contribution.

    --
    Phil Marti
    Clarksburg, MD

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Phil Marti, Oct 17, 2008
    #3
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