"Jo Firey" <JAfirey[at]NETZERO.NET> writes:

- quote -

MA preparers can sympathize with this. Currently (and for
many years) federally deductible trad IRA contributions are
not deductible in MA. So the taxpayer (and/or preparer :-)
has to keep track of MA IRA "basis". Then when taking
distributions, in MA all your distributions are considered a
return of MA IRA "basis" until the "basis" is exhausted, at
which point all your distributions are MA taxable income.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Barry Margolin <barmar[at]alum.mit.edu> wrote:
- quote -

Though years in which you didn't make an after-tax
contribution might not require an 8606, so keep the last
8606 you did file, even if many years old.

- quote -

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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"Phil Marti" <philmarti[at]aol.com> wrote:
- quote -

I think the posters issue was that you can't just
immediately use the entire basis in one shot.

--
David M. Woods, EA
www.woods-financial.com
Norwood, MA 02062

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"Ray Jenkins" <rayj.balt[at]verizonDELETHIS.net> wrote:

- quote -

You must use Form 8606 to determine the non-taxable portion
each year a distribution is made.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Ray Jenkins <rayj.balt[at]verizonDELETHIS.net> wrote:

- quote -

When she made the after tax contribution she should have
filed form 8606.

Each year she takes an IRA distribution she will use form
8606 to calculate the taxable portion of that distribution.
It is not one of the more complicated forms when you just
use it to find how much of the distribution is taxable.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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"Ray Jenkins" <rayj.balt[at]verizonDELETHIS.net> wrote:

- quote -

File a form 8606 form for the year of the nondeductible
contribution (should have been done in that year, but can be
filed standalone). This will document the amount of the
account that is now nontaxable. Update the form for the
current year and calculation of the nontaxable portion of
each withdrawal will be easy.

If you are lucky, the IRS will not charge you the non-filing
penalty for failure to do this in the year of contribution
($50, I think).

"Continuous nightmare" is a little melodramatic, eh?

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Ray Jenkins wrote:

- quote -

Hire an accountant?

Seriously, it's just another few calculations that have to
be done each year (although they have to be done each year
dating back to the year she made an after- tax contribution,
and some of the records may no longer be available) -- it
shouldn't be THAT difficult.

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"Ray Jenkins" <rayj.balt[at]verizonDELETHIS.net> writes:

- quote -

I'm a bit removed from the venue, but it's definitely no
harder than 5th grade arithmetic.

Phil Marti
Topeka, KS

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"Ray Jenkins" <rayj.balt[at]verizonDELETHIS.net> wrote:

- quote -

Well if it was that small, you could just ignore it and pay
tax on all the IRA withdrawals.

Curious, here. Long, long ago California had a lower IRA
limit than the federal. Is everyone out there that prepares
California taxes keeping careful track of the non-taxable
for California portion of the withdrawals?

Jo

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Ray Jenkins wrote:

- quote -

She should have completed IRS Form 8606 Part I for the year
in which she made the after-tax contribution in order to
establish her cost basis. When she takes a distribution,
she completes Part I of the Form 8606 where she computes the
nontaxable portion of the distribution and the revised cost
basis for the next year.

If she failed to file the original 8606 to establish basis,
she can download a copy from the IRS for the proper tax
year, fill it out, sign it on the back and mail it to the
same IRS location where you file your tax returns.

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"Ray Jenkins" <rayj.balt[at]verizonDELETHIS.net> wrote:

- quote -

Why was it a mistake? If you're not eligible for deductible
contributions, it's still a good idea to make non-deductible
contributions, to get tax-deferred compounding.

- quote -

As long as you've kept track of the tax basis of the IRA on
Form 8606 every year, you just plug it into Form 8606 when
you start taking withdrawals. This will take care of the
calculations for you.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA

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- quote -

Well, that is what you have. Use form 8606 each year she
takes a distribution.

Helen, EA in PA
50 miles, 3 days, 1 cause - Multiple Sclerosis Challenge Walk for the Cure
October 1 to October 3, 2004
Donate on-line at www.msandyou.org

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Some years ago my wife made the mistake of putting a small
after-tax contribution into her IRA. Within a few years she
will reach the mandatory withdrawal period.

Somehow, I see a continuous nightmare in the allocation of
pre-tax and after-tax withdrawals.

Any advice on how to handle this will be appreciated.

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