I have a client who has some after-tax contributions in an IRA, along with pre-tax contributions. They also have another IRA and 401(k)s. My question is: Can we convert just the after-tax contributions to a Roth IRA or is it pro-rated as a % of the overall retirement assets?
You will find the answer to this question on Form 8606. The form must be filed by the IRA owner any time they make after-tax contributions to an IRA, and any time after that when they take a distribution from any IRA. The distribution will come partly from the pre-tax dollars and partly from the after-tax dollars. The formula for the calculation is on Form 8606. For the calculation you use all IRA balances, including SEP and SIMPLE balances. For a Roth IRA conversion you cannot use only the after-tax balance.
When aggregating RMDs, how does the IRS know that you’ve satisfied the RMD from both accounts?
I had consulted a CPA before I took my first RMDs last Dec.; (I turned 70.5 in 2017) and want to double check that I did this correctly:
I aggregated my RMDs from two IRAs:
- A Single Premium Deferred Annuity with Delaware Life (I had rolled over my pretax 403b to this several years ago when my hospital employer switched retirement plan companies) My Delaware Life Anniversary statement says “Contract Type: IRA-Regular”. This was the larger of the two RMDs.
- I took the entire combined RMD from my Traditional IRA with Wells Fargo for which I received a 1099-R. Form for the total amount from both IRAs and indicated that this was “all RMD” in TurboTax that I just completed.
I am still receiving notices from Delaware Life about taking my RMD before April 1st, which has me doubting myself. Are they both Traditional IRAs whose RMDs could be aggregated?
Will the IRS put this all together when they get the information from both companies, as well as my tax return?
Thank you in advance for a quick response.
What you have done is fine. IRS has no way of knowing whether or not you have taken your full RMD. IRA custodians are only required to notify IRS of IRA owners who have an RMD for the year. They are not required to tell IRS the amount of the RMD or to tell IRS about beneficiaries who have RMDs. You might want to contact the annuity company and let them know you took the IRA from another account and make sure that they will not automatically send you the RMD. Most IRA companies only send out the RMD when you ask you them to, but it wouldn’t hurt to check.