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How to document non-deductible Traditional IRA contributions beyond filing Form 8606?

When you have a non-deductible Traditional IRA contribution I am aware that Form 8606 needs to be filed with the return for that tax year. The other comments I see regarding this are to "keep good records". What is considered good recording keeping of this? Is keeping a copy of the return filed with the Form 8606 the record keeping this refers to? What about the brokerage firm where the IRA account resides, should they be informed concerning a non-deductible IRA contribution, and what do they do with this information? Do they keep track deductible and non-deductible IRA contributions on the brokerage account statement?

What happens when the money is taken out at retirement with respect to the non-deductible IRA contributions, how are they treated differently?

I have searched about this and the only articles I have been able to find that discuss this pertain to some sort of special conversation of a Traditional IRA to a Roth IRA in 2010. Thanks!

Edward

Reply to
eastcoastguyz
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Some IRA custodians notate the IRA as being a conduit or a rollover IRA when the IRA was created via direct rollover from an employer plan.

Other than that, the IRA custodian has no responsibility to know if contributions were or were not deducted by you on your tax return, so does not track this information. In fact, there is a box on Form 1099-R which reports IRA distributions that says the IRA custodian is unable to determine the taxable portion of the distribution. Except where the custodian does not allow Rollover/Conduit IRAs to accept new contributions, the custodian should Always check that Unable to Determine box.

The last form 8606 has the amount of unrecovered nondeductible contributions in all your traditional IRA accounts -- it is the IRA Tax Basis -- and Form 8606 takes you through a calculation that i) finds the amount of your distribution that is not taxable, and ii) recalculates your new IRA Tax Basis. So if you always save your last 8606 you can use it the next time you take an IRA distribution or make a nondeductible contribution (or a few other things involving Roth IRAs.)

Reply to
Arthur Kamlet

Keep a record that the contribution was made. That could be your receipt from the custodian, a year-end statement from the custodian, or the Form

5498 that the custodian issues documenting the contribution.
Reply to
Phil Marti

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