In this episode of Ask the Hammer, a Retirement Daily reader has a question about how to avoid paying taxes twice on after-tax dollars that were put into an IRA:
Some years ago, like in the 1980s or 1990s, I contributed to a non-deductible IRA, but after consolidating some of my IRAs and various institutions, I’ve lost track of those nondeductible contributions. I’d like to start doing Roth IRA conversions. I know there’s something called a pro-rata rule. What do you suggest?
Jeffrey "The Buckinghammer" Levine of Buckingham Wealth Partners, met with Retirement Daily editor Robert Powell to answer this question.
In this episode of Ask the Hammer, Levine covers:
- How to avoid paying taxes on the same money more than once
- What IRS file 8606 is, how to find it, and when it is required to be filed
- How to prove after-tax money went into an account
- What IRS form 5498 is and how it relates to this question
- The importance of an IRA deduction line
- How common this question is
Make sure to watch the whole episode to get all the details! Getting the full answer could mean the difference between keeping or losing (to taxes) thousands of dollars.
Stay tuned for more Ask the Hammer!