I have a question regarding processing Form 1099-R (distributions from IRAs). My contributions were all POST-tax. The 1099-R that I received from the mutual fund shows all of this amount as "taxable amount" (box 2a). They also withheld 10% of the
distributed amount for federal tax. It seems to me only the capital gains from this should be taxed. Is that what I should report in box 2a? Thanks!

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But Pub. 590-B is dated 2020 . . .

Download the 2021 edition of Publication 590-B from the
following link. "Figuring the Nontaxable and Taxable
Amounts" is on page 16.

https://www.irs.gov/pub/irs-pdf/p590b.pdf

Bob Sandler

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On Thu, 7 Apr 2022 10:54:41 EDT, Ravi wrote:

I have a question regarding processing Form 1099-R (distributions
from IRAs). My contributions were all POST-tax. The 1099-R that I
received from the mutual fund shows all of this amount as "taxable
amount" (box 2a). They also withheld 10% of the distributed amount
for federal tax. It seems to me only the capital gains from this
should be taxed. Is that what I should report in box 2a? Thanks!

Hi, Ravi! First, an important question: was this a Roth IRA or
Traditional IRA? If it's a Roth IRA, and you meet the requirements
(account at least 5 years old and you at least 59� years old), then
the entire distribution is tax free.

Since your mutual fund listed a taxable amount, it looks like this
was a Traditional IRA. In that case, not just capital gains, but
_all_ gains, are taxable, in addition to the amount of PRE-tax
contributions if any. (You have told us that the latter is zero in
your case.) For instance, any dividends would also be gains, and thus
taxable. Whether the gains are capital gains, dividends, or anything
else doesn't matter: the taxable gains are all taxed as ordinary
income.

In rough terms, you take the ratio of your basis(*) in your IRA to
the total value of your IRA, and the non-taxable portion of your
distribution is that ratio times the amount of the distribution.

(*)Your basis will be found on your latest form 8606.


The bible for this is Publication 590-B: <https://www.irs.gov/forms-pubs/about-publication-590-b>

Specifically, here's how to compute the taxable and nontaxable
amounts of your distribution: <https://www.irs.gov/publications/p590b#idm139949182549664>

But Pub. 590-B is dated 2020, and the year numbers can be confusing.
The latest form 8606 and instructions are here and may be easier to
follow:
<https://www.irs.gov/forms-pubs/about-form-8606>


Do you use software to file your taxes? I'd expect pretty much any
software would handle form 8606, which is where these computations
are done.

--
Stan Brown, Tehachapi, California, USA https://BrownMath.com/
Shikata ga nai...

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<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
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On Thursday, April 7, 2022 at 8:08:41 PM UTC-4, Bob Sandler wrote:

But Pub. 590-B is dated 2020 . . .

Download the 2021 edition of Publication 590-B from the
following link. "Figuring the Nontaxable and Taxable
Amounts" is on page 16.

https://www.irs.gov/pub/irs-pdf/p590b.pdf

Bob Sandler

Thank you, Bob. Just downloaded 590-B.

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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
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On Thursday, April 7, 2022 at 7:18:40 PM UTC-4, Stan Brown wrote:

On Thu, 7 Apr 2022 10:54:41 EDT, Ravi wrote:

I have a question regarding processing Form 1099-R (distributions
from IRAs). My contributions were all POST-tax. The 1099-R that I
received from the mutual fund shows all of this amount as "taxable
amount" (box 2a). They also withheld 10% of the distributed amount
for federal tax. It seems to me only the capital gains from this
should be taxed. Is that what I should report in box 2a? Thanks!

Hi, Ravi! First, an important question: was this a Roth IRA or
Traditional IRA? If it's a Roth IRA, and you meet the requirements
(account at least 5 years old and you at least 59½ years old), then
the entire distribution is tax free.

Since your mutual fund listed a taxable amount, it looks like this
was a Traditional IRA. In that case, not just capital gains, but
_all_ gains, are taxable, in addition to the amount of PRE-tax
contributions if any. (You have told us that the latter is zero in
your case.) For instance, any dividends would also be gains, and thus taxable. Whether the gains are capital gains, dividends, or anything
else doesn't matter: the taxable gains are all taxed as ordinary
income.

In rough terms, you take the ratio of your basis(*) in your IRA to
the total value of your IRA, and the non-taxable portion of your
distribution is that ratio times the amount of the distribution.

(*)Your basis will be found on your latest form 8606.

The bible for this is Publication 590-B: <https://www.irs.gov/forms-pubs/about-publication-590-b>

Specifically, here's how to compute the taxable and nontaxable
amounts of your distribution: <https://www.irs.gov/publications/p590b#idm139949182549664>

But Pub. 590-B is dated 2020, and the year numbers can be confusing.
The latest form 8606 and instructions are here and may be easier to
follow:
<https://www.irs.gov/forms-pubs/about-form-8606>

Do you use software to file your taxes? I'd expect pretty much any
software would handle form 8606, which is where these computations
are done.

--
Stan Brown, Tehachapi, California, USA https://BrownMath.com/
Shikata ga nai...

Thank you, Stan. This is very helpful. I have a better grasp of it now thanks to your email. Yes, my IRA is traditional. I'm sure I will have more questions as I go along.

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<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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The wording is somewhat confusing. What most people consider a "Post-Tax" contribution is one that you did not deduct from your income before figuring your tax. A "traditional IRA" is one where you deduct the amount you contribute.

There are some cases where employers sponsor post-tax retirement plans. In these cases the contributions are not deductible and you do not pay tax on the annual income in the account, but when you withdraw the money some portion of it is taxed.

It would help if you were clearer about what the structure of the plan in question is.

--
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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On Wednesday, April 20, 2022 at 2:41:29 AM UTC-4, Roger Fitzsimmons wrote:

The wording is somewhat confusing. What most people consider a "Post-Tax" contribution is one that you did not deduct from your income before figuring your tax. A "traditional IRA" is one where you deduct the amount you contribute.

There are some cases where employers sponsor post-tax retirement plans. In these cases the contributions are not deductible and you do not pay tax on the annual income in the account, but when you withdraw the money some portion of it is taxed.

It would help if you were clearer about what the structure of the plan in question is.
--

Not quite. A traditional IRA can be post-tax or pre-tax or a combination of the two.

Ira Smilovitz, EA
Leonia, NJ

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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>

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