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Category: Tax
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For 21 years while I worked, I invested money in ...

Customer Question

For 21 years while I worked, I invested money in profit sharing and my company''s stock plan. The money was invested AFTER TAXES. First taxes were taken out, and then I would invest.    Now that I have retired and put the money into an IRA, do I have to pay taxes if I remove any of it?   If not, how do I prove that taxes have already been paid?   Is there a form to fill out to show this information?
Submitted: 6 years ago.
Category: Tax
Expert:  RD replied 6 years ago.

Did you invest the money in IRA after taxes all this year and now are planning to withdraw it? What is your age?

 

Customer: replied 6 years ago.
Reply to Renu V's Post: No, I have invested no money in my IRA this year but I did withdraw some and I don't feel I should have to pay tax on the withdrawal. My age is 69.
Expert:  RD replied 6 years ago.

But did you invest the money in IRA account all these years? If yes, than any withdrawal from the IRA account over the amount that you had invested(from your after tax money) will be subject to tax.

Normally, the Form 1099R that you receive will report the taxable distribution amount.

 

Let me know if you have any question. Bonus and Feedback will be highly appreciated!!!

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

Expert:  Bill replied 6 years ago.
Customer

If you rolled over the entire amount (including the after-tax contributions) in the profit sharing plan to an IRA then the after-tax amounts become part of your IRA basis that must be reported on Form 8606. Each year that you take distributions from your IRA you will have to file Form 8606 to calculate the portion of the distribution which is tax-free based on your IRA basis and the value of all of your IRA accounts. The IRA trustee will send Form 1099-R to you each year that you take a distribution but it will not identify the amounts that are taxable and tax-free for these purposes. See page 5 - http://www.irs.gov/pub/irs-pdf/i8606.pdf

 

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Bill
Bill
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EA, CEBS - 34 years experience providing financial advice