Author Topic: Tracking Roth Basis  (Read 930 times)

mistymoney

  • Handlebar Stache
  • *****
  • Posts: 2433
Tracking Roth Basis
« on: October 09, 2020, 07:53:20 PM »
so I was reading around the forum today and saw something referencing this site:

https://livingafi.com/2014/05/18/drawdown-part-3-strategy/

which stated:
You do need to carefully track your Roth IRA basis.  This is the amount of your contributions minus any expenses.  If you put 50K into your Roth over 10 years and itís now worth 80K, your basis is still 50K.  You should be tracking basis via form 8606, to be filed with the IRS yearly.

I have a Roth account that I funded years ago (more than 10) and have never filed this form.
Is this only for conversions? when you are funneling in and out a lot?

I was relying on the investment company records for whenever I needed to access this.

secondcor521

  • Walrus Stache
  • *******
  • Posts: 5526
  • Age: 54
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: Tracking Roth Basis
« Reply #1 on: October 09, 2020, 08:09:09 PM »
I think you can file a Form 8606 with the IRS on an advisory basis if you want to.  This would have the benefit of keeping track of your basis on an ongoing basis (no pun intended), as the blog points out.  Although the instructions do not require you to file the form if you're just contributing to a Roth.

Personally I have not filed Form 8606 for that reason, and I just keep my own records based on information from my IRA custodian and most but not all Form 5498s that I have received.

Yes, you should file Form 8606 if you do a Roth conversion or a Roth distribution.  I have filed Form 8606 for my Roth conversions, but have just left Part III (Roth distributions) blank.  If or when I take my first Roth distribution, I'll complete line 22 (Roth basis) according to the instructions and based on my records mentioned in the previous paragraph.

terran

  • Magnum Stache
  • ******
  • Posts: 3807
Re: Tracking Roth Basis
« Reply #2 on: October 09, 2020, 09:02:56 PM »
You shouldn't need to file form 8606 unless you make conversion. The contributions should be reflected on form 5498 which is sent to you and the IRS in May each year. I don't know whether you'd still be able to access it after 10 years if you didn't save them. I also track it in a spreadsheet along with the taxable amount (from conversions) just to have an easier way to access it than going through each year's 5498, but that's just for myself, I still keep the forms in case I'm ever audited.

mistymoney

  • Handlebar Stache
  • *****
  • Posts: 2433
Re: Tracking Roth Basis
« Reply #3 on: October 10, 2020, 11:15:11 AM »
thank you both! I got really scared I had somehow blown this. Feel better now :)

 

Wow, a phone plan for fifteen bucks!