Non deductible IRA distribution

[patavid]

If a taxpayer makes non-deductible contributions to a traditional IRA and subsequent
qualified distributions are made, is it the custodian's responsiblity to include the nontaxable amount on the 1099-R? ( I really don't know how they could know this in all cases). If not, how is the taxable amount determined. Any references would be appreciated. Thanks in advance. I never had a client make non deductible IRA contributions that I know of.

[FEDUKE404]

Form 8606

...is the answer.

(And the same form should have been filed "along the way"....)

FE

[KBTS]

The custodian has no way of knowing if there have been non-deductible contributions, so the 1099-R will probably list the same amount in box 1 & 2 with the "taxable amount not determined" box checked. The client may or may not have been filing Form 8606 with their return each year to show the non-deductible contributions they made. You will need to know this amount along with the FMV of all IRAs at 12/31/11. You will then use Form 8606 to determine how much of the distribution is taxable and how much is a recovery of basis. I think the instructions for the 8606 explain pretty clearly how to do this - now getting your software to do it might be another issue.