In most cases, retirement contributions are made on a pretax basis, reducing taxable income in the year of the contribution. However, they can also be made with after-tax earnings. When done correctly, these amounts will be tax- and penalty-free at the time of distribution. Good record keeping is essential, especially for IRAs, which do not have the same reporting and taxing requirements as qualified retirement plans have. Rollovers have special rules. For example, after-tax amounts cannot be rolled over from an IRA to a qualified plan. If necessary, consult a tax professional for assistance on how to handle after-tax contributions.
Key Takeaways:
- One of the most important things for after-tax balancing is keeping good records and making sure the IRS knows about your plan.
- When it comes to after tax assets, typically your plan administration will indicate the taxable portions on a 1099 form.
- After your tax balances have been completed you can roll them over in a few different ways including into an IRA or a qualified plan.
“However, it is also possible to contribute amounts to employer-sponsored plans on an after-tax basis, and contributions can be nondeductible for IRAs.”
Read more: https://www.investopedia.com/articles/retirement/05/aftertaxassets.asp
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