Do I really need to add Roth IRA contribution information to my tax return?
I've never quite understood what the purpose of a contribution form was for a post-tax contribution to a Roth IRA. I'm not getting a deduction for it or anything, after all. Is there any consequence if a person were to forget to document a Roth contribution in income tax filings?
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If you decide to make any withdrawals prior to age 59-1/2, you first withdraw deposits, no tax due. Beyond that, there's an early withdrawal penalty, 10% tax on that amount. The form is the way to track cumulative deposits.
From the IRS instructions for Form 8606:
Penalty for Not Filing
If you are required to file Form 8606
to report a nondeductible contribution
to a traditional IRA for 2010, but do
not do so, you must pay a penalty,
unless you can show reasonable cause.
Overstatement Penalty
If you overstate your nondeductible
contributions, you must pay a 0
penalty, unless you can show
reasonable cause.
From my personal experience I did not have to show any documentation for a Roth contribution, since its being done with post tax dollars. And once the money is in the Roth it anyways completely sheltered from future taxes. I file taxes using Turbo Tax and I have a Roth account since the last few years.
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