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#1
11-09-2005, 03:00 AM
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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 << ================================================== ===== >> << 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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#2
11-09-2005, 05:57 PM
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Re: Roth &401K vs. IRS
"joe" <JoefXnospamX11@pacbell.net> wrote:
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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:
accounting until it comes out. Quote:
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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#3
11-09-2005, 05:57 PM
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Re: Roth &401K vs. IRS
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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:
401k when you take the money out - see question 3. Quote:
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:
-- 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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#4
11-09-2005, 05:57 PM
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Re: Roth &401K vs. IRS
joe <JoefXnospamX11@pacbell.net> writes:
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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:
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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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#5
11-10-2005, 03:00 AM
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Re: Roth &401K vs. IRS
Rich Carreiro <rlcarr@animato.arlington.ma.us> wrote:
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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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#6
11-11-2005, 03:00 AM
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Re: Roth &401K vs. IRS
joe <JoefXnospamX11@pacbell.net> wrote:
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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:
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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#7
11-11-2005, 03:00 AM
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Re: Roth &401K vs. IRS
"joe" <JoefXnospamX11@pacbell.net> wrote:
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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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