| Author |
Message |
joe
Guest
|
 Posted:
Wed Nov 09, 2005 9:00 am Post subject:
Roth &401K vs. IRS |
|
|
Are the following notions correct for BOTH Roth and 401K:
1. The distributions from the mutual funds that they are
invested in will NEVER have ANY financial or other tax
consequence on me - NOW or LATER?
2. I will NEVER need to account (to IRS) for what I paid for
the (Roth or 401k) investments in mutual funds from now on
until, AND INCLUDING, when I start using the $ for my
retirement purposes.
3. When I withdraw the 401k $ then I will simply pay
ordinary income tax on those amounts. The ROTH has NO taxes
due since they were paid prior to handing over the $ to the
Roth fund.
Am I missing something or are the above points correct?
Regards
J
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<< and does NOT constitute legal OR professional advice. >>
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Phil Marti
Guest
|
| Posted:
Wed Nov 09, 2005 11:57 pm Post subject:
Re: Roth &401K vs. IRS |
|
|
"joe" <JoefXnospamX11@pacbell.net> wrote:
| Quote: | Are the following notions correct for BOTH Roth and 401K:
1. The distributions from the mutual funds that they are
invested in will NEVER have ANY financial or other tax
consequence on me - NOW or LATER?
|
I don't think you meant what you said. Of course your
investment results in these retirement plans have a
financial consequence for you. However, the only tax effect
is when the money goes in and when it comes out. What
happens in the meantime doesn't get reported on a tax
return.
| Quote: | 2. I will NEVER need to account (to IRS) for what I paid for
the (Roth or 401k) investments in mutual funds from now on
until, AND INCLUDING, when I start using the $ for my
retirement purposes.
|
Again, once the money is in the plan there's no further
accounting until it comes out.
| Quote: | 3. When I withdraw the 401k $ then I will simply pay
ordinary income tax on those amounts. The ROTH has NO taxes
due since they were paid prior to handing over the $ to the
Roth fund.
|
Correct, as long as the Roth distributions are "qualified."
See IRS Publication 590.
--
Phil Marti
Clarksburg, MD
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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Don Priebe
Guest
|
| Posted:
Wed Nov 09, 2005 11:57 pm Post subject:
Re: Roth &401K vs. IRS |
|
|
| Quote: | Are the following notions correct for BOTH Roth and 401K:
|
<Question 3 first ... >
| Quote: | 3. When I withdraw the 401k $ then I will simply pay
ordinary income tax on those amounts. The ROTH has NO taxes
due since they were paid prior to handing over the $ to the
Roth fund.
|
True under the usual retirement assumptions (your age, how
old the Roth is, etc.) If the 401k contains any
non-deductible contributions, you will pay ordinary income
tax on a reduced portion of the withdrawals.
| Quote: | 1. The distributions from the mutual funds that they are
invested in will NEVER have ANY financial or other tax
consequence on me - NOW or LATER?
|
You will eventually pay tax on those distributions into the
401k when you take the money out - see question 3.
| Quote: | 2. I will NEVER need to account (to IRS) for what I paid for
the (Roth or 401k) investments in mutual funds from now on
until, AND INCLUDING, when I start using the $ for my
retirement purposes.
|
You will never have to account for any of the details on the
funds within the 401k or Roth. If you are still making
non-deductible contributions to the 401k, you (or your
employer) will have to keep tract of the total amount of
these non-deductible contributions, so that only the proper
proportion of the withdrawals will be taxed.
| Quote: | Am I missing something or are the above points correct?
|
Assuming that the laws don't change <grin>.
--
Don EA in Upstate NY
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>
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Rich Carreiro
Guest
|
| Posted:
Wed Nov 09, 2005 11:57 pm Post subject:
Re: Roth &401K vs. IRS |
|
|
joe <JoefXnospamX11@pacbell.net> writes:
| Quote: | Are the following notions correct for BOTH Roth and 401K:
1. The distributions from the mutual funds that they are
invested in will NEVER have ANY financial or other tax
consequence on me - NOW or LATER?
|
Correct.
| Quote: | 2. I will NEVER need to account (to IRS) for what I paid for
the (Roth or 401k) investments in mutual funds from now on
until, AND INCLUDING, when I start using the $ for my
retirement purposes.
|
Correct. All the IRS cares about is how much money
goes into the accounts and how much money comes out
of them. What happens in the accounts is immaterial
(unless you invest in a prohibited investment).
| Quote: | 3. When I withdraw the 401k $ then I will simply pay
ordinary income tax on those amounts.
|
Correct.
| Quote: | The ROTH has NO taxes due since they were paid prior to
handing over the $ to the Roth fund.
|
Correct *if* all the rules for making a qualified withdrawal
are met and if any converted monies have been in the account
for five years before being withdrawn.
--
Rich Carreiro rlcarr@animato.arlington.ma.us
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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joe
Guest
|
| Posted:
Thu Nov 10, 2005 9:00 am Post subject:
Re: Roth &401K vs. IRS |
|
|
Rich Carreiro <rlcarr@animato.arlington.ma.us> wrote:
| Quote: | joe <JoefXnospamX11@pacbell.net> writes:
Are the following notions correct for BOTH Roth and 401K:
1. The distributions from the mutual funds that they are
invested in will NEVER have ANY financial or other tax
consequence on me - NOW or LATER?
Correct.
2. I will NEVER need to account (to IRS) for what I paid for
the (Roth or 401k) investments in mutual funds from now on
until, AND INCLUDING, when I start using the $ for my
retirement purposes.
Correct. All the IRS cares about is how much money
goes into the accounts and how much money comes out
of them. What happens in the accounts is immaterial
(unless you invest in a prohibited investment).
3. When I withdraw the 401k $ then I will simply pay
ordinary income tax on those amounts.
Correct.
The ROTH has NO taxes due since they were paid prior to
handing over the $ to the Roth fund.
Correct *if* all the rules for making a qualified withdrawal
are met and if any converted monies have been in the account
for five years before being withdrawn.
|
Thanks for all the answers from everyone.
We have got to assume a few things such as I am a legitimate
person that is simply attempting to follow all the rules.
That rules will remain stable, that I'm very close to 65
years old and no further contributions will be made to
either the roth or 401k and there will likely be no
withdrawals for another 5 years etc.
Regarding 1. There were hints that there WERE consequences
by some - how?
Regarding 2. The $ (less than 100k) is in there - through
legitimate part time employment (W2) and a legit employer.
At the time of withdrawal will I need to account for "how
and when" every dime was placed in the fund? Some seem to
say that the amount placed in the fund mattered. I believe
that 100% of whatever is taken out of the fund will be taxed
as ordinary income since it was never taxed previously. Am
I wrong?
Regarding 3. The funds were invested legitimately from
earned income - as far as I know. Do I need any paperwork
at ANY time later to prove whatever is was placed in the
Roth is there - per the rules? If so what?
<Assuming I'm a US citizen and not involved in some sort of
fraud audit or other unusual circumstance.>
Regards,
J
posted to news group
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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Seth Breidbart
Guest
|
| Posted:
Fri Nov 11, 2005 9:00 am Post subject:
Re: Roth &401K vs. IRS |
|
|
joe <JoefXnospamX11@pacbell.net> wrote:
| Quote: | Regarding 2. The $ (less than 100k) is in there - through
legitimate part time employment (W2) and a legit employer.
At the time of withdrawal will I need to account for "how
and when" every dime was placed in the fund? Some seem to
say that the amount placed in the fund mattered. I believe
that 100% of whatever is taken out of the fund will be taxed
as ordinary income since it was never taxed previously. Am
I wrong?
|
If there were no _taxable_ contributions then it doesn't
matter; you don't need to account for them. If there were
some taxable contributions, then that amount can be removed
tax-free, so you have to track it.
| Quote: | Regarding 3. The funds were invested legitimately from
earned income - as far as I know. Do I need any paperwork
at ANY time later to prove whatever is was placed in the
Roth is there - per the rules? If so what?
|
No.
Seth
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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| Back to top |
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Phil Marti
Guest
|
| Posted:
Fri Nov 11, 2005 9:00 am Post subject:
Re: Roth &401K vs. IRS |
|
|
"joe" <JoefXnospamX11@pacbell.net> wrote:
| Quote: | Thanks for all the answers from everyone.
|
You're welcome. One of the problems with tax answers on
Usenet is that we have a tendency to offer all possibilities
to the point that the answer to the original question gets
lost in the shuffle. Let's try it this way, dealing only
with YOUR situation.
For all retirement accounts, it would be irresponsible for
you not to track your investment performance, but IRS
couldn't care less what goes on in there, and you report
nothing about what goes on in there. You do not have to
keep any kind of tax information about individual
investments.
Roth IRAs. Track your contributions and keep your
statements showing them. The annual report from the
custodian will suffice.
While you plan that all your distributions will be
"qualified" and thus have no tax consequence, life doesn't
always play out the way we planned. Please note that
"nonqualified" does not mean illegal. It simply means that
the requirements for a tax-free distribution weren't met.
What constitutes a qualified distribution is in IRS
Publication 590.
Since all your 401(k) contributions were pre-tax, all
distributions will be taxed in full as ordinary income.
You may now return to blowing dust bunnies across the floor
until you begin taking distributions or reach age 70 1/2, at
which time you must begin taking required minimum
distributions from the 401(k). When you're ready to begin
taking distributions, a quick checkup on the current rules
and reporting will no doubt yield you a wealth of
informative replies.
--
Phil Marti
Clarksburg, MD
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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