I guess what I was asking in my prior message #52052 is how do you calculate how much you owe Uncle Sam when you withdraw all monies in a Traditional IRA account. I've probably lost some banking and stock transaction forms after all these years have passed. IRA was transferred several times. I'm 61 years old.Many thanks!
If the monies in the traditional IRA were all tax deductible contributions (and their earnings), then the money was never taxed. What you take out of the IRA then gets taxed as ordinary income. (You won't need to refer to your transaction forms at all.) See Pub 590.
I guess what I was asking in my prior message #52052 is how do you calculate how much you owe Uncle Sam when you withdraw all monies in a Traditional IRA account.Assuming there were never any nondeductible contributions, the amount of the check is included in your income on line 15b of the 1040. How much tax depends on how much total income and deductions.Phil MartiVITA Volunteer
Mr. Marti: Thanks for reply. But I do have a question based on your answer about the check income going onto line 15b of the 1040. What is Form 8606 used for? Or don't they use it anymore? Or is this form for deductible contributions? Appreciate your time and effort.
What is Form 8606 used for? Thanks to our busy beavers in Congress, lots of things. In the context of your original question, Part I of Form 8606 is used to report nondeductible contributions to traditional IRAs and to calculate the taxable portion of IRA withdrawals when there have been nondeductible contributions.Phil Marti
Mr. Marti: Thanks for answering previous questions. Appreciated!One last one:When my wife and I talk about an IRA withdrawal, for the life of us, we just can't get it straight in our minds what are deductible and nondedictible contributions. Even an engineer that I walk with in the morning, who i consider to quite knowledgeable, is confused by it. Is there a list of deductibles and nondeductibles? If not, can you give a few of both for example purposes. Thanks!
At the time you were puting money into your IRA, did you deduct the amount of your contributions from your taxable income? These contributions are considered tax deferred. However, higher income individuals and those covered by pension plans were not allowed to defer tax on their contributions. Some people have both kinds of contributions. So if you paid income tax on the contributions once, they are not taxed again. Only the earnings from the IRA wold be taxed as regular income.
When my wife and I talk about an IRA withdrawal, for the life of us, we just can't get it straight in our minds what are deductible and nondedictible contributions. Nondeductibles are those traditional IRA contributions that you didn't deduct from your income on your tax return. They should have been reported on Form 8606, Part I.Phil Marti
mldorsey1: Thank you for being so kind in answering my question. Appreciated!
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