1 : I bought retirement credit for a couple of years of previous service as a teacher. I used funds from an IRA and they were deposited almost immediately into the retirement fund.
2 : The problem is that I did not roll over the funds directly from the IRA into the retirement fund. The fund has coded my deposit as a post tax contribution and now the IRS is calling it taxable.
3 : Any ideas on how I can prove that this was an innocent attempt to move retirement funds and prevent it from being a taxable event?
Answer :
1 : If you roll over your Traditional IRA, there are some common mistakes you must avoid. If you don't, you could face unnecessary taxes and penalties;Unless it is a direct trustee to trustee rollover, then, after you receive the funds from your IRA, you have 60 days to complete the rollover to another IRA/retirement account.. If you do not complete the rollover within the time allowed, or receive a waiver, or extension, of the 60-day period from the IRS, the amount will be treated as ordinary income in the IRS's eyes. That means you must include the amount as income on your tax return, where any taxable amounts will be taxed at your current, ordinary income tax rate. Plus, if you did not reach age 59.5 when the distribution occurred, you'll face a 10% penalty on the withdrawal.
2 : I guess it depends on your specific situation; as you can see, Making after-tax contributions to a traditional IRA account sets you up for a lifetime of recordkeeping and increasingly difficult arithmetic unless you're OK with paying taxes twice on your contributions. Any pretax contributions and all of the growth, i.e., interest, dividends, capital gains, etc. In a traditional IRA are taxed as ordinary income at your tax rate at the time of the withdrawal. However, if you make after-tax contributions, you are required to pay tax only on the growth from those contributions. Let's say...............To read more or for more tax tips, Please Click Here
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