No. of Recommendations: 0
hello everyone!

before i address my concern, i want everyone to know that i feel REALLY dumb right now. moreover, i tried to search the board somewhat to see if my concern(s) had already been covered. i did not see anything, but i wouldn't be surprised if i overlooked something.

so, PLEASE help me out if you can. here goes:

about 10 years ago when i was 20 yrs old or so, an insurance agent sold me a horrible investment instrument which was designated as a traditional ira. i contributed a small amount on a monthly basis. over the years i NEVER took the ira deduction because i did not know about it and i was never advised about it by this insurance agent. it should be also added that i was not making any substantial income to speak of, so i'm VERY confident that my modified agi would not have prohibited me from taking such an ira deduction over the years. AS SUCH, I WAS MAKING NON-DEDUCTIBLE CONTRIBUTIONS OVER THE YEARS THROUGH IGNORANCE (sadly, i did not even hear about a 8606 form until last tax season)....

SO, last tax season i completed form 8606 for the first time and wrote the irs a nice note explaining my ignorance the best i could. i further reflected my basis on the form.

i now have converted that ira to a roth (utilizing a more suitable investment). now, i obviously need to pay taxes on the taxable portion. since all of my contributions were non-deductible (through ignorance), it is my understanding that i simply need to subtract the total contribution amount (basis) over the years from the value of the traditional ira at the time of conversion. i also have the 1099-r reflecting the total distribution (conversion) amount.

here's my concern. as you all can tell, i'm a rookie with this stuff. so, i thought it would be prudent to consult a tax professional (h&r block in this case) to assist with my year 2000 tax filing. the h&r block person told me that "YOU CAN ONLY MAKE NON-DEDUCTIBLE CONTRIBUTIONS IF YOU ARE UNABLE TO TAKE THE IRA DEDUCTION". in my case, the h&r block person said that i owe taxes on EVERYTHING, because i MADE NON-DEDUCTIBLE CONTRIBUTIONS WHEN I WAS ABLE TO TAKE THE IRA DEDUCTION - ALTHOUGH UNFORTUNATE, I HAVE TO ESSENTIALLY PAY TAXES TWICE ON THE CONTRIBUTIONS....

i'm not sure that the h&r block person is correct. after all, i read in pub 590 for year 2000 returns (page 12 in ch 1 under the subsection "designating contributions as nondeductible" in the second paragraph of the same), the following extract:

"when you file, you can even designate otherwise deductible contributions as nondeductible contributions".

so, i'm a bit confused and concerned here. the good news is that we are not talking about a lot of money here (which further exemplifies the crappy investment). either way, i think that i will have a refund this year. however, i eagerly await your comments, help, advice, laughter, scorn or sympathy. any response would be appreciated and educational.

so, is the h&r block person correct in saying that only those people who can not take the ira deduction are permitted to make non-deductible contributions?

thanks so much!

the ignorant one
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.