Non Deductible IRA Gains roll to 401k?

Submitted by Michael Cangelosi on Sun, 2020-10-25 19:25

Hello,

I have an IRA that was originally a rollover 401k but now some some co-mingled assets (pre-tax and post tax)
In an effort to start doing backdoor Roths i had planned on sending my IRA to my 403b provider (they will accept roll-ins of pretax funds) and their fees and offerings are pretty good.
My question is, do i literally figure out my basis and hold it back and send All other funds to the 403b including any “gains” on the post-tax basis? Since those gains are taxable, I would assume thats where they should go to make it easier. The way some of these contributions went into the Vanguard IRA as a cash money market account would make it near impossible to figure out how much interest it has gained over the years, especially since the money market has cash from stock sales that were in pre-tax accounts originally.

2nd question.

I had a 2008 non-deductible IRA that was transferred to the rollover IRA in 2010. I do not have access to the 2008 tax-return anylonger and the tax preparer has since passed away. I do not know if the 8606 was filed for that year. Do you know if the IRS will accept an 8606 now for 2008 (as well as redoing all my following years to correct the basis) ?

Thanks



Submitted by Alan - IRA critic on Sun, 2020-10-25 22:07

  1. Yes, you keep your IRA basis in your IRA and roll the remainder of the balance to the employer plan. Your IRA basis will be shown on line 14 of the last 8606 you filed, plus any additional ND contributions you made since filing that return. If you have more than one TIRA account, treat them all as one combined account, as that is what Form 8606 does.
  2. You need to be very sure that you made a non deductible TIRA contribution to file an 8606. The IRS will go back that far, but if they check their records and find that you deducted a TIRA contribution or made a Roth contribution for 2008, you can expect a penalty. Back then, no one made non deductible contributions if they were eligible for a Roth contribution, so you would only make a ND contribution if your MAGI was also too high for a Roth contribution. If you retained your 5498 forms, you would at least know if you made a TIRA or Roth contribution, but still would not know if your TIRA contribution was deducted or not. You might also look at any tax returns after 2008 that were done and included an 8606, since what you did in 2008 would be fresher in your mind then. 
  3. If you end up filing an 8606 for 2008, you will have to amend all 8606 forms filed since that year since your IRA basis is cumulative. That includes also amending any tax returns for the last 3 years for which a distribution was taken using the wrong basis amount.

Submitted by Michael Cangelosi on Sun, 2020-10-25 23:41

Thanks for the replies…1) Great that part is the easy part now !!  2) We were not eligible for Roth in 2008, so i thought i could make a deductible IRA contributions, until i realized we made too much for that as well since we had work 401k’s.   So i stopped contributing to that IRA after that 1 contribution and in an effort to consolidate, I put it into the Rollover IRA.   I put a call in to a family member of my old preparer who passed who also does taxes.  Im hoping she still has access to 2008, although i doubt it. 3) yes, I will amend the 8606’s.   I didnot take any distributions or conversion in this IRA yet.  I was planning on doing the 403b roll-in and Roth conversion this year.  But instead I will wait for this to be sorted out and do it in 2021.  

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