Get distribution on non taxable portion of contribution

Submitted by Donna Madden on Sat, 2018-01-27 17:13

Back in 2000 and 2001, contributed $5000 each year as non-taxable IRA. How do I get that out now. I am 60. I have my 8608 forms from then. My retirement company does not know how to process this without me getting taxed.



Submitted by Ben Meyer on Sat, 2018-01-27 17:47

  • Something is unclear about what you meant by a “non-taxable IRA”.  In 2000 and 2001 the traditional IRA contribution limits were $2,000, not $5,000.  The IRA limits reached $5,000 in year 2008.  Was that a typo for $2,000?  Was this a traditional IRA or was it some other type of IRA plan (SEP, SIMPLE)?  Form 8606 (not 8608) would only be completed for contributions to a traditional IRA.
  • If your traditional IRA contributions were deductible they would have been untaxed in the year you made them, and form 8606 would not be required.  They would have been deducted from your income for that year on form 1040 as an “IRA deduction”.  This is currently deducted on line 32 of form 1040, but may have been a slightly different line number back in 2000 and 2001.  In this case the full amount of any distributions would be taxable.
  • On the other hand, if the traditional IRA contributions in 2000 and 2001 were made as non-deductible contributions, you would have reported them on form 8606, and paid tax on the contribution amounts back in those years.  You won’t pay tax again on the amount that was previously taxed.  When you take distributions, the IRA custodian will send you a form 1099-R showing the amount of the distribution in box 1 and also in box 2a.  But they will also put a check in box 2b, indicating that the taxable amount of the distribution has not been determined by them.  In this situation you will determine the taxable and non-taxable portions of the distribution by filing another form 8606.  The form will guide you through calculating the taxable and non-taxable portions of the distribution.  In this way, you will pay tax only on the earnings, and not on your original after-tax contributions.
  • Since you are over 59 1/2 you won’t pay the 10% penalty for early withdrawals.

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