Unknown IRA basis

I'm helping someone who just started taking RMDs from a traditional
IRA. They have no idea of their basis. Contributions would have been
made in the 1970s & 80s and their tax records from that period are at
best fragmentary (although in at least two years it included letters
from the IRS questioning the deductibility of their IRA contributions
but no indication as to how the matter was resolved).
The IRA custodian doesn't have online records going back that far and
they probably wouldn't know basis anyway.
Can the IRS tell us when the last 8606 was filed and what was on it
(after any IRS changes)?
Is assuming $0 basis their only option at this point?
Reply to
Jim Prescott
snipped-for-privacy@seas.rochester.edu (Jim Prescott) posted:
There is _no basis issue_ in a traditional IRA. The RMD is based on the IRA balance as of the end of the previous year.
Now, if the TP was making "after tax" contributions to an IRA, and wishes to withdraw those -- net without interest, of course -- then the TP can request IRS for copies of returns for the years in question -- and could include in the request a specific query regarding Form 8606. That particular amount can be withdrawn with no tax liability -- but separate from the RMD.
The RMD can be computed by using Dec 31st 2007 balance as reported by the Trustee on Form 5498 -- which should have been out by now. Anyway, the TP should be able to get a confirmation, if the 5498 was misplaced, and that balance figure is the only necessity for calculating RMD. See Pub 590 and check the appropriate Appendix for your friend, to determine the exact RMD.
Reply to
an_ordinary_guy snipped-for-privacy@hotmail.com (Bill) writes:
You can't withdraw non-deductible IRA contributions like that. They come out pro-rata, with the denominator being the total value of ALL the TP's traditional IRAs. See Form 8606.
No, it can't.
-- Rich Carreiro snipped-for-privacy@rlcarr.com
Reply to
Rich Carreiro
In article ,
Perhaps you are thinking about certain employer plans?
In most cases IRA distributions must be allocated between after tax and pretax moneys based on basis and year end valuation. The 8606 does that for you.
Special cases where you can take only pretax portion include the currently defunct Qualified Charitable Distribution and the new IRA to HSA conversion.
The usual distribution requires allocation.
Reply to
Arthur Kamlet
Actually, it is without liability. However, it must be prorated as a ratio applied to all distributions. It's not possible to withdraw ONLY the post-tax contributions from a traditional IRA. Perhaps "Bill" was thinking of the Roth IRA?
Reply to
D. Stussy
In article , an_ordinary_guy snipped-for-privacy@hotmail.com (Bill) writes:
| There is _no basis issue_ in a traditional IRA.
There may be for state tax purposes. Massachusetts does not allow a deduction for IRA contributions and in turn does not tax withdrawals until they exceed the sum of taxed contributions. Of course, they may want proof of those contributions and they don't seem to understand that a "1099" isn't it. :)
Dan Lanciani ddl@danlan.*com
Reply to
Dan Lanciani
How far back to the IRS records go?
The instructions for line 6 of form 4506 say
Tax return requested. (Form 1040, 1120, 941, etc.) and all attachments as originally submitted to the IRS, including Form(s) W-2, schedules, or amended returns. Copies of Forms 1040, 1040A, and 1040EZ are generally available for 7 years from filing before they are destroyed by law. Other returns may be available for a longer period of time. Enter only one return number. If you need more than one type of return, you must complete another Form 4506.
I imagine that if the returns are being analyzed for fraud, they may be kept around much longer.
Request your prior year tax return is expensive. $39 for each return. From 1970 to 2007 is 38 years, total of $1482. Probably your client has the last few years tax return in their possession already.
Maybe there is a way to ask the IRS for a running total of the 8606 -- or perhaps the most recent return that had an 8606. Maybe you can write "8606" in line 6, and in line 7 say most cent return with a form 8606, and in line 8b enter 1 return, and just enclose $39. Worst case is they can write back in 60 days and ask you to pay more.
Reply to
snipped-for-privacy@bde-arc.ampr.org (D. Stussy) posted:
D. Stussy nailed it. I was addled in my thinking -- torn between the "RMD" issue and the FIFO application to early Roth distributions. Mea Culpa. Appreciation the clarifications, all.
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