Roth IRA contributions-Should I amend my taxes?

Question

Here are my questions for you to answer after reading my situation: 

1) Should I amend both 2007 and 2008 taxes?
2) Should I only amend my 2008 taxes?

Before I get into my story, I know people think you don't have to report your Roth contributions on your taxes & I have heard that as well, BUT I was told by my bank that when I go to retrieve the funds many years from now, the government will not know how much I have contributed, so they ADVISED ME to show my Roth contributions on my taxes and starting in 2009 I know to do this.

I did not know you should do this until this year and the people that do my taxes never mentioned it, so TWO tax filings have passed with no Roth contributions.  I put $4000 in a Roth at the beginning of 2008 for 2007.  The bank messed up and put it towards my 2008 contribution.  I went to make my 2008 contribution early this year & found out about the mess up, so I contributed another $5000 to 2009 and $1000 to max out the 2008 year.  I found paperwork this week and took it to the bank to prove I had designated $4000 to go to 2007.  The bank is fixing their error at this time.  They said they would send a letter to the IRS that I contributed $4000 for 2007.  With the IRS getting this letter, do I need to amend my 2007 taxes or just my 2008 taxes or should I do both?

Any other thoughts?

Anonym · Accepted Answer

Dear S:   Never go to a bank for tax advice!!    

Good move on the Roth deal. Roth contributions are after tax and come out tax free. There are some minor tweaks but just leave the money in there and after 5 years all distributions are tax free. I would suggest you find a broker who is knowledgeable about  retirement accounts and investing and sign up with them. If your bank did not follow your wishs you have an issue with them.

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent

Judy · Answer

If you make both deductible and non-deductible contributions to a regular IRA (not Roth) there is a form to fill out with your tax return.  For a Roth, there isn't.  Your banker is confused.

Keep your records of what you contributed, especially given the messup with the 07/08 contribution, in case it's ever questioned.  But you don't have anything to report or amend.  And when you retire it doesn't matter how much was your contribution and how much was appreciation.

Bash Limpbutt&#39;s Oozing Cyst© · Answer

Tell your banker to stick to banking.  He or she does not know what they are talking about as far as taxes are concerned.  The folks who did your taxes never brought the subject up because there's nothing for you to report.

You don't "report" Roth contributions on your tax return.  There's no place to record them.  Any reporting is handled automatically by the account custodian.

When you take the distributions down the road when you are retired, you don't pay tax on the distributions.  The mere fact that the funds are being distributed from a Roth means that they are tax free to you.

There's nothing for you to amend.  The bank corrected their error on the original reporting.  That error could have resulted in a bill from the IRS for the excise tax on an excess contribution but it's been rectified now, so no worries and no action needed from you.

Anonym · Answer

The form 5498 is AUTOMATICALLY done by the ROTH custodian and it's sent to the IRS and you. 
 *That* form will track your total contributions.

The "letter" the bank is planning to send the IRS is a corrected 5498.  They will send you a copy as well.

All you need to do is save the 5498s.

Helen, EA in PA · Answer

Repeating - YOU DO NOT SHOW ROTH IRA CONTRIBUTIONS!  Stop listening to your banker.  He knows NOTHING about taxes.

Helen, EA in PA

Roth IRA contributions-Should I amend my taxes?

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