Ira Taxable

[geekgirldany]

Clients had two IRAs they took a total distribution on. They each made one deductible contribution a several years ago and that is all. The 1099R does not show a taxable amount.

They are under the impression that they can deduct the contributions off the distribution they received to get the taxable amount. I am saying no because the contributions were already deducted years before... is this correct?

There is also a simple ira they took a total distribution on. They rolled it from one simple to another years before. They are thinking because they lost money on it they are allowed to take a loss on it.

I've tried explaining that this contributions were deducted from income in prior years so there can not be another deduction. Am I explaining that right or should I say it another way?

Thank you for any help. I am pretty tired right now.
Dany

[Jesse]

http://www.investmentnews.com/article/20090301/REG/303019997

Maybe print out an article similar to this and highlight everything that pertains to their situation. You have something to show them in black and white and maybe that will help them understand.

Sometimes I think they are just so very distraught they just don't want to hear what you are telling them.

[ChEAr$]

My favorite story about IRA's and deductibility, although an unhappy one for client,
is this. Client retired and rolled her 401k into an IRA. Sounds simple enough so far.
BUT.... this "financial advisor" steered the funds into an investment funded by the
newly established IRA which invested in ATM machines to be placed in fast food places, so that any patron with an ATM debit card could access cash to pay for his meal. Well, this idea never caught on, the company went bust, and the IRA went down to zero in 60 days flat.

Try explaining "no deduction" to a client for this.

[geekgirldany]

Wow thanks Jesse! That will help in explaining the situation to several of my clients. I believe I just was not putting it in a way they understood.

Geez, I've had so many clients withdraw their IRA or 401Ks because they said it was losing money. Most understand about not being able to deduct losses but others don't. This article will help out so much.

[taxmom34]

i normally tell clients that whatever activity within the IRA or 401K is not reportable. and isn't it strange that they don't ask when these accounts are coming up with gains, only losses.

[zeros]

IRA loss for 2009

Had a client come in who had an IRA in stock worth $103,000. It went down to $36K and he panicked and sold. He had to pay tax on the $36K plus 10% penalty.Question: How much of the $103K is still left? Hmmm.

[Lion]

Who Sold?

Did your client take a distribution? Or, did his IRA sell a falling stock and sit there with the cash or newly purchased securities inside the IRA?

If he took a distribution, was it a total distribution of all IRAs in that class? You might have some help for your client.