Nondeductible IRA withdrawal
Client has $72K in a nondeductible IRA account (NOT a Roth). Client also has $600K in a 401k. If Client withdraws the $72K from her non-deductible IRA, would there be any tax on the distribution?
John Lau
Client has $72K in a nondeductible IRA account (NOT a Roth). Client also has $600K in a 401k. If Client withdraws the $72K from her non-deductible IRA, would there be any tax on the distribution?
John Lau
Permalink Submitted by Alan - IRA critic on Thu, 2013-05-02 21:20
Depends on how much client reported on Form 8606 as non deductible contributions as they were made. Pro rating applies to all TIRAs owned, but the 401k is not included. Therefore, if the most recent 8606 shows 40,000 as basis, then a distribution of the full balance would include 32k as taxable. It is not likely that the contributions would be the same as the value of the IRA. If the 8606 forms were not properly filed, it is still possible to reconstruct prior years and file the forms retroactively.
Permalink Submitted by John Lau on Fri, 2013-05-03 00:28
Thank you for your answer, Alan.