Ernie Klein <ecklein[at]pacbell.net> writes:

- quote -

Yes, it's been changed and that is no longer the case.

*However*, because a 401(k) plan is blown if non-ded
trad IRA contributions get rolled into it, many 401(k)
custodians still won't accept rollovers from commingled
IRAs, even though tax law permits it.

--
Rich Carreiro rlc-news[at]rlcarr.com

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Tom Russ <fbq9qo$nkt$1[at]panix2.panix.com> wrote:
- quote -

Unless you might have to file for bankruptcy.

In which case an uncorrupted IRA resulting only from a
rollover from a qualified employer plan has unlimited
protection, while other IRAs have $1 million protection in
bankruptcy.

--
ArtKamlet at a o l dot c o m Columbus OH K2PZH

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Tom Russ wrote:

- quote -

Is that really true? I thought it's still valid: The reason
you want to segregate rollover funds is so that you can roll
them back into a 401k if you so desire.

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Tom Russ <tar[at]isi.edu> wrote:

- quote -

I thought that if you rolled a 401K into an IRA, you had the
option to roll that back into a different 401K plan from a
different employer at some time in the future, but if the
rollover IRA was commingled with money from a different
source (other than the rollover 401K) then you lost that
option. Did something change this?

--
-Ernie-

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"nomail1...[at]hotmail.com" <nomail1...[at]hotmail.com> wrote:

- quote -

No. See below.

- quote -

The value of all IRAs are aggregated to determine the
taxable amount. It doesn't matter which account you draw the
money from.

If you think about it, post-tax treatment in IRAs applies
only to the contributions. The earnings are always
tax-deferred, so even an IRA with only pre-tax contributions
would have a mixture of taxable and tax-free distributions.
But since the law requires you to aggregate all balances it
doesn't matter.

- quote -

The IRS knows because you need to tell them. Form 8606 is
used to keep track of your basis in the IRA. You file this
every year in which non-deductable contributions are made,
and then each year in which you take distributions, because
the ratio will change due to investment returns in the IRA.

It was once advisable to keep roll-over and non-roll-over
accounts separate, but that is no longer necessary.

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"nomail1...[at]hotmail.com" <nomail1...[at]hotmail.com> wrote:

- quote -

There is no need to keep separate accounts, as the IRS makes
you add up the total of all your IRAs and calculate a
percentage non-taxable based on your non-deductible
contributions over the years. The IRS bases the calculations
on the Form 8606 that you filed each year you had a
non-deductible contribution to an IRA.

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- quote -

Yes. See the instructions for form 8606.

--
Don EA in Upstate NY

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"nomail1...[at]hotmail.com" <nomail1...[at]hotmail.com> wrote:

- quote -

after tax (nondeductible) contributions have to be reported
(by you) on Form 8606 for the year they apply. Otherwise
you pay tax twice on that money.

When you take money out, you use Form 8606 to determine the
amount that is taxable--you will be asked for the value of
ALL your traditional IRA's at the end of the year to
calculate the percentage that is taxable. A Roth IRA is
different, with distributions considered in order of
contributions, conversions, and earnings.

Other than keeping things simple, I don't see a drawback
from commingled funds.

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"nomail1983[at]hotmail.com" <nomail1983[at]hotmail.com> wrote:

- quote -

No.

- quote -

That's correct.

What you may be thinking of is that you shouldn't comingle
rollover and contributory IRAs, because the rollover IRA can
be rolled into another employer plan later (although there
are few reasons why one would want to do so -- the only one
I can think of is so that you can then take a loan from the
employer plan).

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

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"nomail1...[at]hotmail.com" <nomail1...[at]hotmail.com> wrote:

- quote -

Possibly, but as long as you maintain accurate records and
file your 8606 form whenever you make a post-tax
(nondeductible) contribution, it should not be a problem.

- quote -

Correct

- quote -

If you haven't read Pub 590 you may not be aware of a
fundamental truth about IRA accounts: No matter how many
individual accounts, brokers, etc that you use, the IRS
considers ALL these subaccounts to be part of a SINGLE IRA
account. Whether you physically separate your pre- and
post-tax contributions is irrelevant, each withdrawal is
effectively taxed as prorated amounts of each in all your
subaccounts. This is true regardless of which account you
tap for the withdrawal. As I stated above, form 8606 is the
route that you use to track the taxability of such
withdrawals.

- quote -

See above.

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I know I need to study IRS Pub 590, but I am hoping some
kind soul will offer some educated insights ....

As I recall, it is best to avoid comingling pre- and
post-tax contributions in IRAs. I think it simplifies
things when determining the tax on distributions. Is that
right?

Or does the IRS require that you prorate the taxability of
distributions across all IRAs, independent of the ratio of
pre-tax and post-tax contributions in each IRA that funds
were actually distributed from?

Assuming that I am correct about perferring to keep pre- and
post-tax contributions in separate IRAs, is there anything I
can to correct the situation if I inadvertently comingled
them?

I am talking about effecting a correction, if possible,
within a few days after I pushed the button to consolidate
the separate IRAs.

(I forgot why I was keeping them separate in the first
place, and I decided to consolidate two IRAs that I have at
one brokerage firm.)

If I simply create a new IRA and fund it with the amount of
the post-tax IRA before consolidation, would that be
sufficient.

It is not clear to me how the IRS, decades later, know how
much of an IRA was funded with pre-tax contributions and how
much with post-tax contributions. But if it matters, the
pre-tax IRA, which now includes some post-tax contribution
and its earnings, was designated as a Rollover IRA when the
account was opened.

(I'm not sure that designation has stuck with the account
since then. I need to check records.)

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