SEPP IRA and non-deductible contributions
L1: SEPP IRA and non-deductible contributionsI have a SEPP that consists of a single IRA that was created by rolling over 401k plans. At the time of rollover my post-tax contributions were separated out, so the SEPP IRA consists solely of pre-tax contributions and earnings.
I also have another IRA for emergencies that has both deductible and non-deductable contributions. I have not touched this IRA.
Last year was my first SEPP year, and I am working through my tax form. I seem to recall that the taxability of IRA withdrawals needs to reflect the proportion of deductible and non-deductable contributions across all IRAs, not just the IRA that had the withdrawal.
Does this mean that I need to consider a proportion of my SEPP withdrawals as non-deductible, and use Form 8606, etc?
Or are the rules different because it was a SEPP withdrawal?
Thanks for any help. I’m in another state for a few months and don’t have access to all my normal references.2008-03-11 15:29, By: Jreb10, IP: [18.104.22.168]
L2: SEPP IRA and non-deductible contributionsYes, a portion of your SEPP distribution will be tax free based on the calculations done on Form 8606. In other words, for actual income tax purposes taking a distribution for your SEPP is not different than taking a distribution from an IRA outside the SEPP. The ratio of non deductible contributions considers the prior year end balance in all your traditional IRA, SEP IRA or SIMPLE IRA accounts.
For purposes of complying with the SEPP requirements, the taxable amount is immaterial. It”s the full gross distributed amount that is critical.
2008-03-11 16:12, By: Alan S., IP: [22.214.171.124]