IRA with taxed and non-taxed contributions

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L1: IRA with taxed and non-taxed contributionsI meet next week with someone who has a 401k and an IRA with before and after tax contributions (in each).
Two questions:
1 – let’s say he never filed form 8606 to document non-deductable contributions, does this mean he has to pay tax on all withdrawals or can he “prove it” another way? How about for the 401k?
2 – when he takes withdrawals, does he withdraw taxable first for tax purposes or is it proportionate?
Thanks2004-11-24 17:06, By: Mobey, IP: [67.106.28.17]

L2: IRA with taxed and non-taxed contributionsHello Mobey:
Probably the best move with respect to the IRA is to file an amended 1040X for 2003 simply attaching Form 8606. But for an audit, this likely enough to preserve the after-tax contributions in that IRA.
For withdrawals from the IRA, each distribution becomes a prorata return of contributions and earnings.
With respect to the 401(k) account, treatment will at least be partially governed by the plan document. However, ususally, a terminated participant can direct that after-tax contributions (only) be distributed first which is a non-taxable event.
TheBadger
wjstecker@wispertel.net
2004-11-24 19:36, By: TheBadger, IP: [66.250.23.22]

L2: IRA with taxed and non-taxed contributionsThanks –
However, let’s say the non-taxed distributions were 5% and were withdrawn proportionately as said. Then in year two the account grows so that the non-taxed portion drops to 4%. Does the calculation have to be done for each year separately?2004-11-28 10:23, By: Mobey, IP: [63.187.192.6]

L2: IRA with taxed and non-taxed contributionsForm 8606 would have to be filed on an annual basis and the percentage of taxable vs. non-taxable would be calculated annually while distributions occur. You may want to check out the instructions to form 8606 on the IRS site. 2004-11-28 10:40, By: Gfw, IP: [172.16.1.74]

L2: IRA with taxed and non-taxed contributionsTHANKS TO EVERYONE.2004-11-28 15:30, By: mobey, IP: [67.106.28.17]