Lost Basis in Roth IRA
I have a client who cannot for the life of him find documentation to support the value of the original contribution he made to his longstanding Roth IRA. He is not yet 59.5 years old but needs some money. In such a circumstance, does the IRS allow one to client a de minimus basis, on the knowledge that 0 basis cannot be the right answer?
Thanks very much for any insights on this!
Permalink Submitted by Alan - IRA critic on Thu, 2021-04-08 18:14
The IRS does not officially recognize basis estimates. Perhaps client can locate enough contribution info to cover the amount he wishes to distribute, and the distribution will be tax free. If client ever converted, that would show on Form 8606 for that tax year. The Roth custodian would issue a Form 5498 for each year showing any regular or conversion contributions for that year. Other sources of info might be the Roth custodian, his check registers, or his tax preparers if he hires that out. The IRS can provide info back to 2011 upon request. Most people can usually piece together enough data to cover the desired distribution amount. If he shows a basis amount on lines 22 or 24 (conversions) on his Form 8606, the IRS will assume he knows his basis, and he could be taxed if the IRS has different info from their own records.