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Author: elly77 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121598  
Subject: IRA RMD & Non-Taxable Money Date: 9/23/2004 11:11 PM
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Hello,
When I retired, I left my 401k with the company, managed by Schwab. The breakdown within the 401k was:
1. Supplemental Contribution (non-taxable money)
2. Company Account
3. Fixed Income Account
4. IRA – (deductible)

Schwab made my Required Minimum Distribution (RMD) for 2002, on the entire fund, prorating the non-taxable amount and showing it as non-taxable in Box 5 on the 1099R.

The middle of December 2003, Schwab informed me they could no longer service the account, and I rolled it over to a Traditional IRA with Vanguard. Schwab calculated the RMD for 2003 on the entire amount, and paid me in non-taxable money from my supplemental account and showed it as non-taxable in Box 5 of the 1099R. In addition, Schwab sent me another 1099R showing the full remaining amount as a rollover (G), with the remaining non-taxable amount in Box 5.

This non-taxable amount is now officially part of my Traditional IRA with Vanguard who does not recognize it as non-taxable and advised that I had to file Form 8606 with my income tax return so the non-taxable amount could be prorated.

Non-deductible IRAs required Form 8606 be filed the year the contribution was made, but since this was supplemental money I had paid taxes on and not a non-deductible IRA, I did not file Form 8606.

If I file Form 8606 with my 2004 Income Tax Return, the IRS will want to know why I didn't file Form 8606 when the contribution was made. What is the best way to resolve this with the IRS so I don't have to pay taxes on this money again?

I would appreciate your thoughts. Thank you.
e
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