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Back in 1994, I opened an IRA to rollover a previous employer's pension plan. I have since been contributing $2000 a year to the same IRA account. I now understand that I may have created an income tax nightmare for myself. What should I do now?
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Probably continue contributing.
There is some extra paperwork if you have mixed deductible with non-deductible contributions. Your rollover must have been deductible; your subsequent contributions may not have been.
So every year with your tax return you should have been filing a form as to how much was contributed, and how much of that was deductible. Thus you have a BASIS in your IRA--an accounting as to how much of the money was after-tax and therefore not subject to tax when you take it out.
By mixing contributed money with rollover money, you lost the right to rollover to a subsequent employer's 401k or 403b plan. However, you likely can do better yourself anyway, so that is no great loss.
If you have already mixed deductible with non-deductible contributions, there is no MORE extra paperwork if you continue as you have been.
Best wishes, Chris
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