IRA Distribution

[Janitor Bob]

Client has a 1099-R from her IRA. $48,000.00 distribution, taxable amount not determined. Client is not aware or does not remember ever making any non-deductible contributiuons,so I assume this distribution in 100% taxable....but how "normal" is this? In your experiences, how many times when you have a 1099-R with taxable amount not determined has your client actually made any non-deductible contributions?

Just wondering

[TAXBILLY]

If the returns were done correctly over the years you would have a Form 8606 tracking the basis.

taxbilly

[Janitor Bob]

I have only done her return this year and last year. Prior years returns that she could find (4 years) did not include a 8606

[Kea]

I've never seen one with non-deductible contributions. I would *think* the client would remember if they made and non-deductible contributions because of the extra effort involved in preparing the return. It seems like that would have been in the discussion. No guarantees though, given how much attentions some clients pay to what you say.

However, I have a client who is divorced and she got 1/2 her ex's IRA. She has no idea if he ever made any non-deductible contributions. She's been divorced since the '80s and may not be able to get that info from her ex.

[Janitor Bob]

In my 12 years of preparing taxes I have never had someobody with non-deductible contributions, so it was not a stretch for me to think that this lady also did not....but now I am beginning to question it....Has anyone else had someone with a 1099-R distribution, "Taxable amount not determined", with it being all taxable?

[Lion EA]

In 15 years of preparing taxes, I had only one couple who made too much to make deductible IRA contributions and made nondeductible contributions. They were smart enough to understand that it still had a benefit to them, after maxing out employer plans and self-employed plans and seeing the taxes they were paying on interest and dividends in their fully taxable investment accounts.

I had a few who finally understood the benefit when Roths became available and heavily advertised and contributed to Roths, but had never made non deductible contributions to Traditional IRAs.

Many made deductible contributions but stopped when contributions were no longer deductible.

Don't worry about it.

[jasdlm]

I often see the 1099 R with the 'taxable amount not determined'. I think some fund companies code the 1099R that way when they were not the original custodians (i.e. client changed investment companies). They do not have the full history on the account, so the safest thing for them is to check 'taxable amount not determined'.

I would pull it all into taxable income unless the client had information to the contrary. If she can't even find her returns, there is no way that you are going to be able to accurately chase it down.

[Jack from Ohio]

Did this person retire from the IRS??

<<<IRS Distribution Taxable??>>>

[Janitor Bob]

No...Title should be IRA distribution

[kcjenkins]

I just fixed that title.

As for the question, it's fairly common to see them done that way. It's taxable unless you KNOW that there were non-taxable contributions. But I think Jasdim has it right on the nose, when the trustee is a successor trustee, they often do not have any information other than how much was rolled in. So they play it safe and leave box 2 empty and check the box for 'not determined'.

[joanmcq]

No trustee ever has basis information. Every IRA distribution has 'taxable amount not determined' on it. How would a trustee know what was on your tax return?

I've seen a lot of people with basis in their IRAs. People that max out all other available retirement plans and want to contribute more (and have the funds to do so).

[SCL]

people who know the basis in their iras from prior non deductible contributions (when this irs scam started 20+ years ago) are rare. it would take an extraordinary effort to track that basis until now.

thankfully, not many folks got trapped in this game...because 401ks, and later, roth iras replaced the income limits that caused taxpayers to think that nondeductible ira contributions was a good idea...it wasn't.