Co Mingle Trad IRA with Rollover

Submitted by PAUL PILLION on Mon, 2022-09-12 14:02

I have a 2 retirement acnts at Vanguard
1 is a Rollover from an employer the other is a Traditional IRA which was created because the Rollover was maxed out.
I have always kept them separate as I was told not to commingle the funds as I had paid taxes on the Trad IRA contributions going in.
I currently take RMD’s and they have always come from the Rollover IRA on the VG Brokerage platform.
VG is requesting I transition the Trad IRA into the Rollover because its on the old Mutual Fund Platform and if not I will insure a maint fee.

? is if I combine the two will it matter for tax purposes come RMD time as a % of it will be from funds already taxed while employed ?
Not sure if it matters a may just have to tax a tax hit ?
Thanks



Submitted by Alan - IRA critic on Mon, 2022-09-12 14:37

  • If you made non deductible TIRA contributions, did you file Form 8606 to report them in the years you contributed? If so, due to the pro rata rules that treat both IRAs as one combined account, a portion of all your distributions would have been non taxable. Therefore, regardless of which account you took your RMDs from, the taxable % should have been the same.  For tax reasons, there is no reason not to combine the accounts if you are retired and there is no possibility that you will ever want to roll your pre tax IRA dollars into your current employer plan. 
  • Again, combining your two accounts now will have no impact on the taxable amount of your RMDs.  The only thing that would change is that you would have one fewer account to deal with. 
  • It sounds like you have not been filing Form 8606 correctly if you actually made non deductible contributions to the TIRA. Also, if you were operating under the impression that the taxable % would differ depending on which account you took distributions from, it seems like you would not have taken those distributions from the rollover IRA. 

Submitted by PAUL PILLION on Tue, 2022-09-13 12:25

Thanks for the input.Only forms I have on file are a 5486. Dont recall filing an 8606 either.Total valeue of the TIRA is less than 50thou so I supoose I should combine them,eliminate an acount and move on as it appears the agrivation tracking all this isnt worth the time.

Submitted by Alan - IRA critic on Tue, 2022-09-13 13:58

  • I think you mean Form 5498, not 8606. Possibly you are confused on how to describe your contributions to these plans. Most likely your contributions were pre tax, meaning you did not pay taxes on the funds used to make the contributions, but that means your distributions would be fully taxable. The form 5498 only indicates that you made an IRA contribution for a specific year, it does not indicate whether the contributions was deducted or not. If you still have your tax return for the year shown on the 5498, check it to see if it shows an IRA deduction. If it does not, then that return should have an 8606 to declare the contribution as non deductible. 
  • First, you need to determine what actually happened in all of these years, before you can decide if you want to go through the work to restore your basis and file any missing 8606 forms for each year affected if you  did not take a deduction.
  • Ignore any Roth IRA contributions or Roth 401k contributions. Those are after tax and distributions will eventually be tax free, and there are no RMDs on Roth money.

Submitted by PAUL PILLION on Tue, 2022-09-13 18:01

  • First, you need to determine what actually happened in all of these years, before you can decide if you want to go through the work to restore your basis and file any missing 8606 forms for each year affected if you  did not take a deduction.

Those reurns are long gone. Most recent contribution was 2010 when I was working P Time. Others go back to 1996 while full time.No records as returns are history so I suppose I am SOL and should take the hit.Wont do that again…Woops.To late!!Thanks 

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