A:

Distributions of after-tax amounts (amounts already taxed) will not be taxable when distributed to you.

However, you will be required to report the amount on your tax return as a non-taxable distribution. The plan should send you a Form 1099-R, which is used to report distributions from retirement accounts. The 1099-R should show the amount as non-taxable. Be sure to provide your tax preparer with a copy of the 1099-R, but first make sure it does not reflect the amount as taxable.

For more information, see Instructions For Forms 1099-R And 5498 on the IRS website.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS
  1. Which amount should the brokerage use for the 1099-R?

    Assets in IRAs do not carry a cost basis for tax purposes. Read Answer >>
Related Articles
  1. Retirement

    Tax-Saving Advice for IRA Holders

    Be informed about benefits and deductions that may apply to you and avoid costly mistakes on your return.
  2. Retirement

    9 Penalty-Free IRA Withdrawals

    If you need to take early distributions, find out which exemptions allow you to avoid expensive consequences.
  3. Retirement

    Managing Annuity Distributions in Retirement

    Strategies to help manage taxable deferred annuity distribution in retirement.
  4. Financial Advisor

    How to Navigate Taxable Mutual Fund Distributions

    It's almost time for year-end capital gains distributions for mutual funds. Here's how to monitor them and minimize their tax impact.
  5. Financial Advisor

    Tips for Tax-Efficient Retirement Plan Withdrawals

    Here's how advisors can help increase tax efficiency for clients who are withdrawing assets from retirement accounts.
  6. Financial Advisor

    How to Save Clients from RMD Aggregation Mistakes

    Advisors can help clients avoid required minimum distribution mistakes in their retirement plans.
  7. Retirement

    How a 401(k) Works After Retirement

    Find out how your 401(k) works after you retire, including when you are required to begin taking distributions and the tax impact of your withdrawals.
  8. Retirement

    Not All Retirement Accounts Should Be Tax-Deferred

    It may be better to leave your assets exposed to the tax man when you're saving to retire.
  9. Retirement

    Important Changes If You Miss a IRA or Other Rollover Deadline

    A non-qualified distribution might still be tax and/or penalty free under certain conditions.
  10. Financial Advisor

    What Baby Boomers Need to Know About IRA RMDs

    Mandatory minimum distributions from traditional IRAs and qualified plans cannot be avoided. But there are several ways to minimize their impact.
RELATED TERMS
  1. Form 1099-R

    An Internal Revenue Service (IRS) form with which an individual ...
  2. Cash Liquidation Distribution

    The amount of capital that is returned to the investor or business ...
  3. Nontaxable Distribution

    A type of dividend that is paid to shareholders of a corporation ...
  4. Distribution

    1. When trading volume is higher than that of the previous day ...
  5. Taxable Income

    Taxable income is described as gross income or adjusted gross ...
  6. Non-Qualified Distribution

    1) A distribution from a Roth IRA that occurs before the Roth ...
Hot Definitions
  1. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  2. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  3. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  4. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  5. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  6. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
Trading Center