IRA doozy
I have a client who rolled over part of a savings investment plan from an auto company into a Traditional IRA. The rollover happened back in 2007. This rollover according to the client and his Ed Jones advisor was partially Post 86 after tax contributions with the rest being earnings on those Post 86 contributions. There was a distribution from this account in 2011. My question is should I apply the entire basis (Post 86 contributions amount) toward this account or should some of it still be applied towards the money that is still in the savings investment plan at the auto company?
Thanks for any help,
Ben
Permalink Submitted by Ben Miller on Fri, 2012-03-23 22:46
One more thing: the money left in the auto company savings investment plan is all pretax.
Permalink Submitted by Alan Spross on Fri, 2012-03-23 22:52
The amount of basis distributed from the plan in 2007 should be reflected on a 2007 1099R, typically a separate 1099R for the after tax amount. If that is not available, client could use a plan statement that showed the breakout of this distribution. If client is sure that after tax money was rolled into his TIRA he should retain the documentation and simply add the after tax amount to line 2 of the 2011 8606 form. IRS instructions for recent years have been to not file the 8606 just to report the rollover of after tax money, but to show it on the next 8606 that would be needed for other reasons.
If there is any after tax money in the auto plan or not, it would not affect the taxation of a 2011 IRA distribution, as the 1099R from 2007 would only show the after tax amount distributed.
Most taxpayers kept after tax money and did not roll it to an IRA, so client should be sure this money was rolled over before showing it on the 8606 for obvious reasons.