The IRS Audit Blog

Posts Tagged ‘roth ira’

Question: Claiming losses in ROTH IRA.?

I closed my Roth IRA in 2009 and want to claim losses on Schedule A.
In 2003 I converted Simple IRA to Roth IRA and the amount ($12000) is indicated on that year form 8606. Also I made contributions to this ROTH IRA account in 2005 and 2006 ($4000 each year). But looking at 2005 and 2006 Federal return I do not see any indication of these contributions (no form 8606). I do my taxes using TaxAct so I probably put the contribution but 8606 was not generated.

So now I need to establish the basis and every publication says that I have to use 8606 tax forms from previous years to do that. So even though I contributed $20K the IRS knows only about $12K.
My question is: can I still use the basis of $20K? I have brokerage statements from previous years that show the contributions made.

Thanks.

Answer: Sure. That is the correct basis.

The brokerage firm reported the contributions to IRS each year so they do have a recorde.

Twin savings goals, one account?

Dear Dr. Don, I want to save money for the education of my 10-year-old child. What is the best way to do this while keeping an eye on my retirement , too? I guess my questions are: Which type of savings plan can take care of both? What will be the tax advantages?

Question: Traditional IRA to Roth IRA recharacterization.?

I contributed 4000 to my traditional IRA (T-IRA) in oct 2007 for 2007 and then 5000 again for 2008. Now I want to recharacterize my 2007 contribution which is 4000 to Roth IRA.

I follow the IRS 590 publication I am unable to decide what will be my account opening balance and what would be my account closing balance.
Since I have made 2008 contribution of 5000, I am not sure how to find the earnings for my 2007 contribution of 4000. Can anyone help?
I have called my IRA manager byt they have asked me to calculate the earning, thats why I have posted it here.
i know the formula earnings= contribution x(account closing balance – account opening balance )/account opening balance
this works great if I did not put the 5000 for 2008. Now my problem is I have earnings from my 2008 contributions also

Answer: Couldn’t you just break this math problem down into multiple pieces and then total the results?

1. You contributed $4K in Oct 2007.
2. The balance immediately prior to (i.e., the day before) your $5K contribution in 2008 would be totally allocated to the $4K contribution, right? What is that amount?
3. Next add that total amount to your $5K contribution. What percent of the total is that prior amount? (i.e., what is the ratio?)
4. Any gains that you received from that point on, you should pro-rate (by that ratio) between your original $4K contribution and your final $5K contribution.
5. Add those pro-rated gains (allocatable to the $4K contribution) to #2 above. That should give you the total amount associated with your initial $4K contribution.

“Any problem can be made simple if you break it into small enough pieces.”
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New Roth retirement account options for 2010

When deciding whether to save for retirement using a traditional or Roth IRA, many people wrestle with the question, “When I retire, will my tax rate be higher or lower than it is today?”

dylan burns as michael jackson

Question: What are the benefits of starting a LLC instead of filing a Schedule C?

I’ve been doing some consulting work on the side and filed a Schedule C last year (and plan to do the same this year) as a sole proprietorship. My “office” won’t qualify for the IRS’ rules about claiming a home office, so I pay taxes on almost all of what I make. Would finding some other business structure help me save taxes?

Answer: There’s not much difference in tax benefits, the biggeet benefit in LLC is that you can’t have your personal assets given to a plaintiff in a lawsuit because you’ve segregated your personal life from the company’s.

6 Mistakes to Avoid When Converting to a Roth IRA

RISMEDIA, January 5, 2010—(MCT)—As years go, 2010 is on course to be a blockbuster for retirement-account owners. Starting this month, all Americans who own a traditional IRA— not just those who have modified adjusted gross income under $100,000—will be able to…

Ch. 2 IRS; LLC Tax

Avoid common mistakes when changing to a Roth IRA

As years go, 2010 is on course to be a blockbuster for retirement-account owners. Starting in January, all Americans who own a traditional IRA — not just those who have modified adjusted gross income under $100,000 — will be able…

Atlanta IRA|401k Rollover Retirement Plan is I.O.U for the IRS!