I know I need to study IRS Pub 590, but I am hoping some kind soul will offer some educated insights .... As I recall, it is best to avoid comingling pre- and post-tax contributions in IRAs. I think it simplifies things when determining the tax on distributions. Is that right? Or does the IRS require that you prorate the taxability of distributions across all IRAs, independent of the ratio of pre-tax and post-tax contributions in each IRA that funds were actually distributed from? Assuming that I am correct about perferring to keep pre- and post-tax contributions in separate IRAs, is there anything I can to correct the situation if I inadvertently comingled them? I am talking about effecting a correction, if possible, within a few days after I pushed the button to consolidate the separate IRAs. (I forgot why I was keeping them separate in the first place, and I decided to consolidate two IRAs that I have at one brokerage firm.) If I simply create a new IRA and fund it with the amount of the post-tax IRA before consolidation, would that be sufficient. It is not clear to me how the IRS, decades later, know how much of an IRA was funded with pre-tax contributions and how much with post-tax contributions. But if it matters, the pre-tax IRA, which now includes some post-tax contribution and its earnings, was designated as a Rollover IRA when the account was opened. (I'm not sure that designation has stuck with the account since then. I need to check records.)
- posted
16 years ago