[GNC] Tax deferred account transfers suggestion

[Charlie Morrison]

>> On Apr 6, 2021, at 10:55 AM, Michael or Penny Novack <stepbystepfarm at comcast.net> wrote:
>>
>> On 4/5/2021 8:57 PM, David Carlson wrote:
>>> David P,
>>> What verb would you use to declare that transactions in or out of a
>>> particular account should appear in a tax report as part of the total that
>>> should appear, for example, on a certain line on form 1099-R from a certain
>>> custodian. The tax schedule report assigns, associates, links or somehow
>>> picks out which transactions create the list of transactions that should be
>>> included on whichever line of whichever form to be reported to the U.S.
>>> IRS.  The user should have created a certain income account to identify
>>> cash moves from a tax deferred asset account to a current asset account,
>>> which should appear on a certain 1099-R form, linked to that form in the
>>> tax report, and those transactions appear on that line in the tax report.
>> I am going to repeat. Not that simple. Distributions from a "regular" IRA would be simple (since all contributions were pre-tax). That is not true for a 401K which might have had most contributions pre-tax but MIGHT have also had post-tax contributions. All contributions to a Roth IRA are post-tax.
>>
>> That means all distributions from a regular IRA are taxable income.
>>
>> Most distributions from a 401k are taxable income (but a portion of a distribution might not be). AFAIK, most administrators of a 401k will get the non-taxable money out first so only needing to cope with one mixed distribution and from then on entire distribution taxable. The statements you get for a 401k usually show what part (if any) of the contribution balance is post-tax.
>>
>> Most distributions from a Roth IRA are mixed, part taxable, part not. I do not know what administrators of a Roth do.  I don't know what statements from  a Roth look like.
>>
>> Michael D Novack
>>
> ROTH IRA’s use after tax contributions only, therefore any distribution from a ROTH IRA is non-taxable. There is nothing that is mixed. You can convert standard IRA’s into a ROTH IRA but you will have to pay taxes on any funds converted to the ROTH IRA. If you’re good at investing you can make a boatload of non-taxable money using a ROTH IRA.
>
> Ken Schneider

It is generally true that a distribution from a Roth is not taxed unless 
the distribution happens before the recipient is 59 and 1/2 years old or 
if the account has been in existence for less than 5 years.  In that 
case, any earnings in the account are taxed plus I believe a penalty.

In addition, a distribution from a "regular" (Traditional) IRA that 
contains both before and after tax money is prorated based on the 
percentage of each in the account.