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    dlaws72148's Avatar
    dlaws72148 Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Nov 9, 2008, 07:23 PM
    Retirement taxes
    IRA's are purchased each tax year with earnings that have been taxed.
    Now it appears that the taxed principal will be taxed again. Can that be?
    If so,. why!
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
    		  
    #2

    Nov 9, 2008, 10:56 PM

    Normally all contribution to Trad IRA is pre-tax money, while contribution to Roth IRA is after tax money.

    If you contributed after tax money to Trad IRA, you must file Form 8606 to report non-deductible contributions. Read http://taxipay.blogspot.com/2008/05/...-roth-ira.html
    Explain why you think that your contribution will be double taxed.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #3

    Nov 10, 2008, 07:26 AM

    The whole idea of an IRA is that your contribution is used to reduce your taxable income. If you did not do this, you may have to file amended returns for all those years.
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
    Expert
    		  
    #4

    Nov 10, 2008, 11:35 AM

    There are many people who contribute to traditional IRAs with after-tax money, as their income may be too high to allow pre-tax contributions. It's also possible to have some after-tax contributions in a rollover IRA. When you withdraw from a traditional or rollover IRA you pro-rate the amount between after-tax conributions (which aren't taxed again when you withdraw) and pre-tax or tax-deffered earnings (which are taxed when you withdraw. Roth IRAs are also funded with after-tax money, although as long as you meet the 5-year holding rule any withdrawals from a Roth are tax-free.
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