I'm very new to PRC. I downloaded Gold for the first time a few days ago and am working on inputting my information. One thing has me stumped though is the After Tax Contribution for the Tax Deferred Accounts. I've got two such accounts. The first being and Traditional IRA from my previous employer and the other being a lump sum pension payment from the same employer that I rolled into a separate IRA account. Both accounts are held at Vanguard and I'm unsure where/how to find this information. Any guidance would be appreciated. Thanks in advance.
Hi Logella,
Based on the information in your question, it's not clear to me that there are any After Tax Contributions in these accounts. In PRC, After Tax Contributions refers to annual contributions made that were beyond the deductible limits ($6000 or $7000 in 2020). I'm probably missing something, so would you please clarify your question? Thanks!
Both accounts are classified as non-Roth IRA accounts.
The first account is comprised of my old 401(k) account that I rolled over to an IRA at Vanguard. The balance was made up of my contributions up to the 401(k) max each year plus the employer match. No additional contributions have been made.
The second account is from my pension plan lump-sum payout (rather than take the annuity) from the same employer. No additional contributions have been made to this account other than reinvestment of dividends.
Both accounts were setup when I retired in late 2019 and then "funded" (i.e. the rollover/transfers completed) in early 2020. It sounds like there might not be any After Tax Contributions for me to take into consideration within PRC.
Logella,
Perhaps the following will help:
Most people do not make after-tax contributions to their employer pensions or their traditional IRAs. Most contributions to these accounts are made by the employer or the employee using pre-tax dollars. This means that income taxes were never paid on the pre-tax contributions and that the eventual distributions from these tax deferred accounts will be fully taxable as ordinary income in the year they are received. Note that direct rollovers from employer plans to a Traditional IRA are not considered to be taxable distributions / events. The only way verify that your contributions are pre-tax would be to contact your former employer, a knowledgeable co-worker, or the year end tax statements (W-2s, 401Ks, 403bs etc.) and reports you may have received from them. The simple alternative is to assume that all contributions were pre-tax.
Many people do not realize the benefits of keeping track of and saving records to support any non taxable contributions that they make. They may end up paying income taxes a second time on the distributions of after-tax contributions on which income taxes were previously paid.
When I retired I went through 40 years of tax records and employer records to determine the non-taxable contributions that I had made.
Hi logella, if these were just regular rollovers, there aren't any after-tax contributions.
Most people don't do after-tax contributions to their IRAs. One situation where you might do that is when you've already maxed out the pre-tax contributions you can make for the year, but still want to put some more in there without getting the tax benefit.
Sometimes people do this to do a back-door Roth conversion, but that's a more complex topic for another day 🙂
Logella, it definitely sounds like you have no after-tax contributions.
Thanks all for the guidance. It's very helpful.
MikeY (formerly Logella)
