Level 5

Question

Traditional IRA contribution and not deductible because AGI threshold

Forum|Forum|6 years ago
February 24, 2020
9 replies
67 views

My client received form 5498 IRA contribution information of tax year 2018 (box 1: $5500 and box 7: plan type IRA only) . Is there anyway to determine it is traditional IRA or Roth?
If it is traditional IRA and not IRA deductible because subject of threshold AGI, does client have to convert to ROTH /other retirement plan or distribution?

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T

Terry53029

Intuit Community Champion

Your client should know, but you state the contribution was for 2018. Are you preparing 2018 or 2019 taxes. Box 7 has 4 boxes and one box should be checked to tell you what kind it was

M

MybesttaxserviceAuthor

Level 5

Thank you Champion

I am preparing for TY 2018

Yes, I agreed that client should know

On form 5498 did not state kind of IRA

I just dont know if it is traditional IRA then the taxpayer must convert to ROTH or other retirement plan because no IRA contribution deduction due to threshold AGI

I made research it looks like to keep traditional IRA and no penalty even no tax advantage

Thanks

Thank

sjrcpa

Level 15

The 5498 will say ROTH in the account name if it is a ROTH IRA.

The more I know the more I don’t know.

qbteachmt

Level 15

"does client have to convert to ROTH /other retirement plan or distribution?"

No. The provision to convert is available as an option; not as a Has To. When they convert and however much they convert, this $5,500 is part of their basis and any conversion will take into consideration basis + earnings to get the % taxable, across all Traditional IRA account balances at the time of the conversion or distribution (which won't be 2018, obviously). It isn't clear why you asked this part.

Don't yell at us; we're volunteers

M

MybesttaxserviceAuthor

Level 5

Thank a lot qbteachmt

You really answered my question

Reason: I am preparing 2019, tp contributed $6500 traditional IRA 2019 (couple $12000), and subject AGI threshold and not IRA contribution deduction. Tp converted to ROTH 2019.

He got 2019 1099R distribution of traditional IRA

I prepared 1040 and attach form 8606,non taxable income distribution $6500 subject to basic cost of non taxable income and ROTH conversion (from traditional IRA to ROTH IRA)

Now I am preparing amended 2018 and saw form 5498 and not see 1099R . Tp said traditional IRA 2018 contribution $5500 (couple $11000). On the 2018 return (tp prepared original) no IRA contribution deduction because of AGI threshold

If he did not convert to ROTH, and keep traditional IRA $5500 ($12000 couple ) as is, then does tp get penalty?

I made research, it is likely that no penalty

Per your answer, I feel more confident "OPTIONAL"

Tp can keep traditional IRA and no need convert to ROTH

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