Tax Pros: What happens to non-deductible IRA contributions at retirement?
Asked by: pmitchem
There are traditional IRAs where you take a tax deduction for each year’s contribution. I’ve been told that if you make an IRA contribution that turns out to be non-deductible you file form 8606 that it is non-deductible.
Then at retirement time when you start taking money out of the IRA, you don’t have to pay income tax on the IRA contributions that were non-deductible.
How does this exactly occur? Do you file a form with the IRS when you withdraw funds from your IRA at retirement age, and have to submit any sort of documentation for approval? Or is this something that you are asked for only if you get audited?
Could some kind Tax Pro please do a brief walk thru how this works? Thank you!