Roth+tIRA contributions in a tax year

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills

Roth+tIRA contributions in a tax year

Postby moneywise3 » Fri Apr 05, 2013 11:55 am

How does IRS know if someone contributes to both traditional IRA and Roth IRA (above the limit)? AFAIK the trustee does not report IRA contributions (neither Roth nor traditional) to IRS. Individuals only report tIRA contributions when doing taxes.
How does IRS find out if someone contributed 5k to Roth and 5k to tIRA in the same year? If they are doing both with the same trustee (e.g. Vanguard), their system checks and prevents it. But they are able to do this using different trustees. Is it purely an honor system?
moneywise3
 
Posts: 129
Joined: Mon Nov 22, 2010 7:54 pm

Re: Roth+tIRA contributions in a tax year

Postby jeff1949 » Fri Apr 05, 2013 12:19 pm

Each Trustee is required to file Form 5498 (IRA Contribution Information) to the IRS by sometime in May for the previous year. The Form 5498 shows your contributions in Box 1.

Since this form is usually filed after April 15th you must keep good records yourself as to how much your total IRA contributions (both Traditional and Roth) were for the previous year.
User avatar
jeff1949
 
Posts: 397
Joined: Mon Mar 05, 2007 11:43 am
Location: Salem, OR

Re: Roth+tIRA contributions in a tax year

Postby Alan S. » Fri Apr 05, 2013 1:09 pm

That is correct. The form 5498 goes to both you and the IRS for each contribution. Therefore, the IRS only needs to total the two of them to see that you have an excess contribution. Also, before the extended due date you can withdraw either one of the contributions in the usual fashion, but after the extended due date the Roth contribution is the one that is deemed to be excess so the ROTH contribution is the one that will have to be withdrawn to stop the accumulation of 6% excise taxes every year. There is no statute of limitations for an excess contribution.
Alan S.
 
Posts: 3637
Joined: Mon May 16, 2011 7:07 pm
Location: Prescott, AZ

Re: Roth+tIRA contributions in a tax year

Postby Default User BR » Fri Apr 05, 2013 1:49 pm

moneywise3 wrote:How does IRS know if someone contributes to both traditional IRA and Roth IRA (above the limit)?

How would they know if you opened ten Roth accounts at different custodians and maxed them all out? As the others have explained, the custodians file the documentation.


Brian
Default User BR
 
Posts: 7503
Joined: Mon Dec 17, 2007 8:32 pm


Return to Personal Finance (Not Investing)

Who is online

Users browsing this forum: Exabot [Bot], tsplinter and 30 guests