IRA TAX DISTRIBUTION QUESTION

I had an IRA with two diffeent institutions. One of those institutions required that I close my account at age 70.

I rolled the taxable portion of the IRA into the other institution and the non-taxable portion was sent directly to me.

I now have all my taxable IRA in one remaining instituion, but the non-taxable portion is in my pocket.

How do I report the distribution on my 1040 ?

Or, would I be better off re-depositing the non-taxable portion into the remaining account before 15 April ? ============= That's what you think. With a traditional IRA, you CANNOT withdraw ONLY the pre-taxed amount. All withdrawals are a mix of taxable and pre-taxed monies, even when only some of it is rolled over.

If it's been more than 60 days since you got the portion sent to you, you're SOL.

I'm not sure what SOL means in tis case ......

Does that mean I am required to consider the entire non-taxable withdrawal as income and pay tax on it as 2015 income , OR do I pay a proportional tax on it as if it were still part of the entire account, and only a part of the withdrawal is non-taxable ??

Thank you for any helpful suggestions.

John

On Wed, 10 Feb 2016 13:15:31 EST, John wrote in

I don't understand how an IRA can have a "taxable" portion (contributions were "before tax") and non-taxable portion (contributions made with $$$ already taxed??). Is that what you did: put "after tax" $$ in your IRA?

S**t Out of Luck

It's proportional. If your total IRA (across all institutions) is $50K, and $10K is taxable, then 20% of your withdrawal is taxed.

If your income is below some threshold, IRA contributions are deducted from your income in the year that you make them. When you withdraw from the IRA, you have to pay the tax on those contributions (the theory being that you'll usually be in a lower tax bracket when you're retired, so you gain from deferring the tax on the contribution and all its growth).

But if your income is above another threshold, you can't deduct it when you contribute. When you withdraw, you don't have to pay tax on these contributions, because you already did.

There's also a range between these two thresholds where you pro-rate the deductibility.

So if you contribute to your IRA in both high-income and low-income years, you'll have a mix of taxable and non-taxable contributions.

And regardless of the type of contribution, all earnings are taxed when you withdraw.

You keep track of the total after-tax contributions in the IRA on Form

Unless it's a Roth, in which case another set of rules applies, and that other set of rules applies separately.... Who designed this mess?????

I think the point is that if it's been more than 60 days, he can no longer put the money back into the IRA and act like it never happened.

Well, before we go further on this, it might be good to get some clarifications.

When you say IRA, are these really actual IRA accounts or are you perhaps using that term to refer to some other retirement account. It just seems odd to me that an IRA would have to be closed at age 70. Hmmm. Maybe they don't want to deal with RMDs? (Required Minimum Distributions).

Also, what sort of institutions are these? Banks, Brokerages, Employers, something else?

Finally, how did you end up with taxable and non-taxable amounts? Did you make after-tax or non-deductible contributions to the accounts? Have you been tracking this yourself with Form 8606?

When did you get the distributions?

My thanks to all who posted advice. It looks like I will have to pay a bit more tax this year than if I had planned it better. No big deal since my non-taxable portion is only about 1% of the total amount, so I didn't lose a lot. And it will make it easier to keep track of in the future by just paying tax on the total RMD..

Thanks again to all..

John

On Thu, 11 Feb 2016 11:47:09 EST, Barry Margolin wrote in

Oh, I didn't know that about the high income. I guess my income was never high enough to get tripped up in that complication.

Thanks.