Inherited IRA

Posts Tagged ‘ira rollover’

How Do I Calculate the Taxable Portion of My Traditional IRA or SIMPLE IRA Distribution or a Conversion to a Roth IRA?

If all of the IRA owner’s traditional IRA (including Standard IRA, Rollover, SEP IRA and SAR-SEP) and SIMPLE IRA combined consist solely of pre-tax, deductible contributions and earnings, distributions or conversions from any of these accounts will be entirely taxable as ordinary income. 

• If the IRA owner filed IRS Form 8606 in each year a non-deductible contribution was made, the portion of the distribution or conversion attributable to the nondeductible contributions will not be taxed.

The IRS requires non-deductible contributions to be reported on IRS Form 8606, which is filed in each year a non-deductible contribution is made. 

• If no IRS Form(s) 8606 have been filed, the IRS will treat an entire distribution or conversion as taxable, even if non-deductible contributions were made.

When determining the taxable portion of an IRA distribution or conversion, the IRA owner must look at his or her entire IRA picture, which includes all of an IRA owner’s SEP-IRA, SARSEP-IRA, Rollover IRA, Traditional IRA and SIMPLE IRA, but not his or her Roth IRA. 

Formula for Calculating the Taxable Portion if an IRA Owner Made Non-Deductible Contributions