For all the tax experts out there

[country_boy]

I have a question about filing taxes. Where I work we use to have a 401k plan I chose the pretax ira option. Since we do our own payroll we no longer have a 401k plan. What my question is do I have to include the amount thats in my ira on my 1040 ez forum?? I havent taken the money out of the ira.

 

[Texan2]

I have a question about filing taxes. Where I work we use to have a 401k plan I chose the pretax ira option. Since we do our own payroll we no longer have a 401k plan. What my question is do I have to include the amount thats in my ira on my 1040 ez forum?? I havent taken the money out of the ira.

I think it depends on wheter it is a Roth IRA or not...
Screwing up taxes can have serious long term reprecussions, I wouldnt get my tax advice on this forum....

 

[country_boy]

Yes I understand, I just was wanting a general answer. Im waiting for my HR to get back with me on that. It is a Roth IRA though.

 

[TexasRedneck]

If you haven't withdrawn the money, the answer is no - there is no tax implications, nor any reason to report it. All increases are deferred, and will be taxed upon withdrawal. The Roth, as you likely know, IS based on taxable income - IOW, you can't deduct the amount you put into it each year - but it not only grows tax-free, it will be withdrawn tax free as well.

 

[cougartex]

Amounts in ordinary and inherited IRA's are not taxed until a distribution (withdrawal) is taken. Roth IRA withdrawals are tax free (after 5 years in the Roth IRA).

 

[Greg_TX]

(I'm not a tax expert - but this ought not be a tax problem for you. The following applies to a traditional IRA and not a Roth)

So your 401k plan offered by your employer has been discontinued? I would talk to the investment company that administered the plan (Fidelity, T. Rowe Price, Vanguard, UBS, etc.) and ask them about your options. If you haven't gotten a distribution and everything is still in the account, then chances are that you can leave it where it is. There will be no tax owed on dividends or capital gains as long as the money stays in the plan (again, assuming a traditional plan and not a Roth, whatever the differences are). Otherwise, you could transfer the funds into an IRA with another company. The only difference then would be that you would no longer be getting any matching contributions from your employer (assuming you did to begin with). If you're told you have to cash out, then you have (I think) 60 days to roll it over into an IRA, otherwise it becomes a taxable withdrawal, with penalties, and you definitely don't want that.

 

[country_boy]

No I havent withdrawn the money, it is a Roth IRA. Its been 4 months since its been discontinued. My company had to drop the plan because the plan was through a payroll company. My boss was paying too much to that company so he wanted to do payroll in house. He tried to find another 401k plan provider but, not a lot of people wanted one so he didnt pursue it. So from what im gathering I dont need to include the amount on my forum, correct?

 

[Greg_TX]

I'd talk to someone in your company or the company that handled the plan before, just to be sure. My wife went through this when her company was sold to another, and I'm just going by memory of what we had to do then. If the plan was dropped 4 months ago and you haven't gotten any distribution, then I'd first ask who is holding the money. Start digging into the statements and you'll probably find some answers there.

 

[country_boy]

Paychex is holding the money, I can access it via web. Hopefully H.R will let me know tomorrow.

 

[Posit]

You're kinda mixing signals... a "pretax IRA" is a traditional IRA - no tax until withdrawn from the account. a Roth IRA is post-tax - that is, the taxes are paid in the year earned and not taxed when withdrawn from the account, so long as other rules are met. If a traditional IRA, you need to enter the amount paid into the IRA in order to get the reduction in fross income. If a Roth, nothing required. In either case, there is no reporting of earnings which stay within the account.

But if you're unsure, you can actually call the IRS hotline and ask...

 

[cougartex]

Traditional IRA May qualify for tax deduction. Can contribute up to $5,000 for the year, or up to $6,000 if you're 50 or older in 2009. Contributions for the previous year can be made through April 15. The same contribution limits apply to the 2010 tax year. Can take money out for qualified events without penalty. Taxed as ordinary income, which could be a tax rate as high as 35 percent, when you start taking distributions. Can start taking money out regularly at 59½. Required to start taking money out after age 70½.Can't contribute after age 70½.

Roth IRA Can contribute up to $5,000 for the year, or up to $6,000 if you're 50 or older in 2009. Contributions for the previous year can be made through April 15. The same contribution limits apply to the 2010 tax year. No tax deduction. Can take out the money you've contributed at any time without penalty. Can withdraw earnings after five years for qualified events. Money not taxed when you take it out at retirement. Don't have to take distributions at 70½. Can contribute past age 70½. Income limit: $105,000 to $120,000 for singles; $166,000 to $176,000 for married couples.

401(k) Contributions taken out of paycheck before payroll taxes are calculated. Can save up to $16,500 for the year ($22,000 if you're 50-plus) in 2009. In 2010, minimal inflation will keep limits the same. Can retire as early as 55. Must take distributions at 70½, unless still working at same company. Can contribute past 70½. Federally protected from creditors. Limited to the plan your employer designs/selects. May or may not be able to borrow. May or may not have matching contributions from employer. Matching may be vested.

SIMPLE IRA Contributions taken from paycheck. Can contribute 100 percent of income, up to $11,500 in 2009; $14,000 if you're 50 or older. For 2010, the limits are the same. Employer matching.Immediately vested. Option for self-employed.

SEP-IRA Employees can contribute up to $49,000 for the year in 2009; the limit is the same for 2010, with annual cost-of-living adjustments for later years. Functions like an IRA. Option for self-employed. No annual reporting requirements.

Solo 401(k)Can contribute 100 percent of income, up to $16,500 for tax years 2009 and 2010 ($22,000 if you're 50-plus). Additional "employer's" contribution of up to 25 percent of yearly business revenue if incorporated (20 percent if a sole proprietor), with the 2009 cap set at $49,000 or $54,500 if age 50 or older. Option for self-employed. Additional paperwork and tax forms required.

Roth 401(k)Contributions taken out of paycheck. Can save up to $16,500 for the year ($22,000 if you're 50-plus) in tax years 2009 and 2010. No immediate tax benefit since money contributed is after-tax. Contributions still grow tax-free. Money not taxed when you take it out at retirement. Can take distributions when you reach age 59½ and have held account for five or more years. There are no income eligibility limits for Roth 401(k) plans. Federally protected from creditors. Limited to the plan your employer designs/selects. May or may not be able to borrow. May or may not have matching contributions from employer. Matching may be vested. Relatively new plan option, so not many employers offer it.A similar Roth 403(b) plan exists for workers in the nonprofit sector.