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How Do I Reclassify a Deductible IRA Contribution to Non Deductible?

Forum|Forum|4 years ago
September 16, 2021
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Last year My wife deposited the maximum amount into her IRA. She also has a 401K. I made a little too much last year for her to qualify for the IRA deduction (over $120, 000.00 income). I work on commission. My taxes aren't due until Oct 15. When she made those deposits she classified them as deductible. Also, she withdrew $1000.00 last year early on in the year. Can she use that $1000.00 against her non-deductable deposits? She is over 60

When last years deposits become non deductible as a result of the higher income, how does she reclassify them? Because when she pulls money out she will get a 1099 and we dont want that to be taxable. Also, we would like to move the non-deductible portion over to my personal IRA for 2021 (I dont have a 401K). Is there a form that needs to filed now? I hope there isn't a penalty

Not A Product Question

Best answer by macuser_22

Oh I understand. Thats terrible lol. Well thankfully its only about $5000.00 that is non deductible. What if she takes withdrawals in the same tax year as she made the non-deductible contribution? would that still have to calculated on a "basis" level?

One other question, is the balance in her 401K also calculated in the "basis" for future withdrawals from the IRA?

Last questions I promise 🙂

As I said above, she had until the extended due date to take a "return of contribution" distribution that is not taxable except for any earnings.

A 401(k) has nothing to do with her IRA.

Critter-3

In the IRA entry section you should be told that the contribution is non-deductible so you can choose to leave the contribution in the IRA and consider it a nondeductible contribution. Doing this will populate a form 8606 which you need to save a copy of it with your IRA information for use in the future when you start taking distributions.

J

JonBoy69Author

But wouldn't I need to file that form with my 2020 taxes, or does it get filed when I make a withdrawal?

I did withdraw a small portion of the non deductible contribution in 2020, how is that reconciled?

Could I just reclassify the 2020 non-deductible contribution as a 2021 deductible contribution?

So confused

macuser_22

Employee

Your question is not clear. Are you not filling a joint return? What do you mean your taxes are not due until Oct 15? How did she say it was deductible if she has not filed yet.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**