Are Proportional Roth and TIRA withdrawals required?
Recently I heard a talk show host informing a caller that when he made withdrawals from his TIRA he must make a proportional withdrawal from his Roth, i.e. if TIRA distribution was 10% of his total TIRAs, then he must also take a 10% distribution from his total Roth IRAs. I’ve never heard of this before. Have I missed something important here…?
I will be taking my first RMD this year from TIRAs. I was not planning to take any Roth distributions for years. (My Roths total only about 15% of my TIRAs.)
Are there any special forms that must be filed with the IRS to document RMDs, other than the approriate entry in the 1040 itself.
Thanks…!
Permalink Submitted by Alan - IRA critic on Thu, 2013-02-14 22:33
What you heard on the show does not apply to IRA accounts. This sounds like one of the rules that apply to TSP participants, the large qualified plan for federal workers. You do NOT have to take any Roth IRA distributions at any point, since there are NO RMDs for Roth IRA owners. Just take your TIRA RMD without regard to the Roth. There are no special forms to file for your TIRA RMDs, just enter the amounts on lines 15a and 15b of Form 1040. You will also need Form 8606 if you reported prior non deductible contributions to your TIRA and reported them on that form.
Permalink Submitted by [email protected] on Fri, 2013-02-15 00:53
Thanks Alan, that’s good news. I have one more question concerning the 8606. One year I did actually (foolishly) contribute $2K into my TIRA as “non-deductible). In recent years I’ve taken some distributions and filing the 8606, which leaves about $1700 non-deductible basis in the IRA. Some years ago when I questioned this board about how I could eliminate the 8606 filing, I believe it was you that answered I could simply give up the minimal tax savings it provided and pay tax on the entire distribution. However, recently I’ve read that you need to file a 8606 ANY time you take a distribution, if you EVER made a non-deductible contribution. Which way is it,..? Is it legal to give up the $15 a year and forget about the 8606, or is the IRS gonna charge me a big penalty for not filing it and refusing their $20…..?
Permalink Submitted by Alan - IRA critic on Fri, 2013-02-15 02:42
You won’t get penalized for overpaying your taxes. The IRS could conceivably correct your return and refund the small taxes due, but they have not been doing that with any consistency, if ever. Therefore, you could just forget your basis if you wanted to. One thing you cannot do is to decide to not file the 8606 for awhile and then try to recover the basis you never claimed later on. The basis you could have claimed for closed years is lost, and you would have to amend the open years to get the refunds. At least that’s the way it is supposed to work. Of course, you could convert your entire TIRA to eliminate the basis, but that would not be wise unless it was to your benefit to do that for other reasons. In the event you are still working, you could also roll your pre tax IRA amount into an accepting employer plan, then convert the remaining basis tax free. But if you are retired, that won’t be possible. It probably would not be worth doing anyway for only 1,700 of unrecovered basis. If you have your taxes done professional tax software handles the 8606 automatically from year to year if you use the same preparer, but not sure with the off the shelf tax programs.