Shredding?

[progree]

7. Another example of something I had to keep going way way back - non-deductible IRA contributions

In the 1980's I made some non-deductible IRA contributions (because I exceeded some income thresholds or something for deductible ones). Let's say $8,000 worth.

When I started doing Roth conversions (I think it was beginning in 1999), let's say I had $92,000 in Traditional deductible IRA contributions including earnings on those and $8,000 of non-deductible IRA contributions, for a total of $100,000 in traditional IRA assets.

If I converted $10,000 of that to a Roth IRA in some year, normally I pay taxes on the entire $10,000 at my ordinary rate. But because 8% of my traditional IRA holdings come from non-deductible contributions, I don't have to pay taxes on 8% of what I converted. Just on 92% of what I converted.

Each year after a Roth conversion, I (via Form 8606) keep track of how much of my non-deducible IRA contribution is left to use. (so the percentage dwindles each year)

Anyway, my tax guy asked me to bring in my Form 8606's from the 1980's (Form 8606 is where you declare non-deductible IRA contributions IIRC), as there was no other proof anywhere that $8,000 in non-deductible contributions had been made. Potentially, over the long run, saving me paying taxes on $8,000 at my ordinary tax rate.

In short, the meme that one can throw away everything after 7 years is correct, until it isn't.