txdd

If your question is about a normal Roth IRA withdrawal that is attributable, by ordering rules, to your past Roth contributions, you file Form 8606 to report. I think mjb's answer is about a withdrawal of a current Roth contribution because you found out you over-contributed.

In a nutshell ... When an individual makes non-deductible contributions to a traditional IRA, he/she reports them on Form 8606 and establishes a "basis" in that individual's IRA accounts. Subsequent withdrawals from any regular IRA (not Roths) are then partially tax-free according to the ratio of the total basis in all regular IRA's for that individual to the total balance in those IRA's. The remaining basis is reduced by the tax-free amount. You also file Form 8606 to report partially taxable withdrawals. Note that an IRA created by rolling over your 401k would be included in the calculation. See IRS Pub 590 and Form 8606 for details.

Unfortunately for you, conversion taxability only applies in the actual year of conversion, apparently 2006 in your case. Another concern is that conversion eligibility must also be accessed for the year of conversion. If your 2006 modified adjusted gross income will be greater than $100000, you will have to recharacterize (undo) the conversion.

1) Leave them there and pay 6% penalty each year until you are eligible for contributions again. 2) Withdraw contributions plus earnings by 10/15/07. Positive earnings subject to tax and possible 10% penalty in 2006 taxes. 3) Recharacterize contributions plus earnings to traditional IRA by 10/15/07. No tax or penalty. Contributions deductible in 2006 if neither of you covered by employer retirement plan.

The maximum contribution for an individual is $4000 for 2005 and 2006 if under age 50, $4500 for 2005 if age 50 by 12/31/05, and $5000 for 2006 if age 50 by 12/31/06. A modified adjusted gross income in a year greater than $150000 lowers these limits. The combined contributions for a married couple can't be greater than their combined earned income (W2 plus self-employment) for the year of contribution. You can split your total contribution any way you want as long as neither of you exceeds the applicable individual limit and the total doesn't exceed earned income.

Whether it's good to put money into a Roth IRA depends on your personal situation. There is no blanket answer. The 95000/150000 income limits are actually where your Roth contribution becomes limited. Some Roth contrtibution is allowable up to modified adjusted gross incomes of 110000/160000. If you are ineligible for Roth contribution in any year (All years are treated independently.), your Roth account goes on with the same status (investments, taxes, earnings, etc.). You just can't add new money to it.

According to the SSA web site, OASI is 5.3% and DI is 0.9%.

Also, no traditional IRA contributions allowed for year in which you reach age 70 1/2 and later years. Roth IRA contributions still OK.

General answers: No 401k rollovers to Roth IRA allowed, only to traditional IRA. If you qualify (filing status, modified Adjusted Gross Income less than $100,000, etc.), you can convert traditional IRA money to Roth IRA and pay the tax in the year of conversion. Whether that makes sense depends on your particular circumstances. You can't make new Roth contributions if your AGI is over $160,000 and married filing jointly.

Yes, you need to track down your old account. However, finding it has nothing to do with contributing now. You can open a new Roth account if you're eligible.

Maybe someone could clear up what doesn't make any sense to me about this case: The man died unmarried. There is no spouse. Shouldn't the death benefit go to whomever he designated? Isn't the wife's claim based on the divorce? If she is successful in attaining a QDRO, then wouldn't whatever she gets be hers in her own right, not as a beneficiary?

The period for recharacterizing your Roth conversion is long gone so you can't change your Roth to traditional. If you have earned income (and are < 70), then you can always contribute to a traditional IRA. It's just the deductibility of your contributions that is income limited. Also, traditional IRA returns are tax deferred, not tax free.

If your earned income is from W-2 wages, then the IRS does know about your earnings because your employer reports that info to them. If you are refering to self-employment earnings, then you are required to file a return (and pay your SE taxes) if you netted more than $400. A Roth contribution based on unreported SE income, could (rightly) raise some questions. Also, return filing income limits are lower if are claimed as someone else's dependent.

A "spousal" Roth IRA is just one established based on your spouse's earned income because your own earned income in insufficient. Once established, the IRA is indistinguishable from one based on your own earned income. It has no connection to any IRA in your spouse's name and is yours in every sense of the word. Also, contributions based on your own and your spouse's income can be combined in the same IRA as long as the total doesn't exceed the annual individual limit and your combined contributions don't exceed your combined earned income.

The instructions for Form 8606 seem to say that you do not file an 8606 just to report an after-tax 401k to IRA transfer. However, the next time you file an 8606 for some other reason, you do add in the after-tax amount into your prior basis. I'm no fan of TurboTax but it looks like it's correct on this one.

I want to emphasize that your parents must have had "earned income" (meaning W2 wages and/or net self-employment income) at least equal to the Roth contribution in each contribution year. If they did not, then the excess contributions were not allowed.

Yes

When you are just starting out and have a relatively small account, a no-load mutual fund is a great way to achieve diversification at low cost. Index funds are typically the lowest cost type of funds. Some of the big names with lots of no-load fund choices are Fidelity, Vanguard, and T Rowe Price. Remember that the choice you make today does not lock you in as your needs change. It's easy to move your IRA between mutual fund companies/brokers. The important thing is to get started with what makes sense now.

If the deposit was reported as a non-deductible traditional IRA contribution, you will need to amend your tax return to correct your Form 8606. No change in tax.

I'm still confused about the question. If the qual plan distributes ONLY the after tax amount then the distribution contains no pre-tax assets and the IRA would have zero basis. True? Now as to part 2 of the question: The taxablility of the Roth conversion would be figured on the basis of ALL tax-deferred IRA's of that person, not just the one that accepted the rollover. So the tax free Roth conversion would only work if that person had no other IRA's. Is that right?

iranovice, It's nice for your dad to make that gift, but you should also check to make sure you are eligible. Did you have at least $3000 EARNED income in 2002? That's W2 wages or net self-employment income. Was your adjusted gross income less than the Roth IRA limit for your filing status? $95,000 single, $150,000 married filing jointly, $0 married filing sepaately for the full $3000. Did you contribute to any traditional IRA for 2002? The $3000 limit applies to the total Roth and traditional contributions.

Your math for maximum deferral amount (technically, salary reduction contributions) and match is correct with the added stipulation that the 3% match cannot exceed the deferral amount. Unfortunately for you, the deadline for deferral contributions is 30 days after the end of the month when the earnings occur. For self-employed income, all of the year's income can be considered earned in December since the net profit is uncertain until the end of year. That means that the deadline for 2002 deferral contributions was January 30, 2003. The deadline for the matching contribution is your filing deadline with extensions, October 15, 2003 for calendar year taxpayers. But if you have not made any deferral by now, your maximum match would be $0. There is also an option to make 2% non-elective contributions which do not depend on deferrals. You might still be eligible for those. Report all (salary reduction + matching or non-elective) contributions for you as an adjustment on 1040 line 31.

You should not have any taxable income from a Roth conversion/recharacterization (assuming the rechar represented ALL the conversion amount plus earnings, which can be negative). 1. Read the instructions for reporting recharacterizations in Pub 590 closely. You will probably need to attach a statement to your return showing the transaction details. 2. Fire your accountant.

You do not report Roth IRA contributions on your tax return.

I believe that the final regs changed the date to determine designated beneficiaries to September 30th of the year following death. The accounts would have to be split before then to consider each child individually. Also, the children would have to be named as beneficiaries on each IRA to enable the split. On any account with the estate as the named beneficiary, the children would not be considered for inherited IRA's.