Do I have to report my Roth IRA on my tax return?
Roth IRAs. A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren't deductible (and you don't report the contributions on your tax return), but qualified distributions or distributions that are a return of contributions aren't subject to tax.
Roth IRA accounts are funded with after-tax dollars—meaning you will pay taxes on it when you deposit the funds. Roth contributions aren't tax-deductible, and qualified distributions aren't taxable income. So you won't report them on your return.
Key Takeaways
You can file an amended return to claim a tax deduction for your IRA contributions on a return you previously filed as long as the timeframe hasn't passed. The IRS will treat your contributions as though they were deductible if you do nothing. It will tax them when you make withdrawals at retirement.
A contribution to a Roth IRA does not reduce your AGI in the tax year you make it. Roth contributions are funded with after-tax dollars, meaning there's no deduction at the time of your deposit; however, when the money is withdrawn from the account (presumably after you retire), no income tax is due on it.
Roth IRA contributions are made with after-tax dollars, and those contributions aren't tax-deductible. Qualified distributions also aren't considered taxable income. So you won't report Roth IRA contributions or qualified distributions on your tax return.
Shareholders who have a retirement account (such as a Traditional IRA, Roth IRA, Rollover IRA, SEP-IRA, or SIMPLE IRA): with distributions during the tax year will receive a Form 1099-R. with contributions for the tax year will receive a Form 5498.
Roth IRA contributions aren't taxed because the contributions you make to them are usually made with after-tax money, and you can't deduct them. Earnings in a Roth account can be tax-free rather than tax-deferred. So, you can't deduct contributions to a Roth IRA.
Failure to file Form 8606 for a distribution could result in the IRA owner (or beneficiary) paying income tax and the additional 10 percent early distribution penalty tax on amounts that should be tax-free.
You can contribute to a Roth individual retirement account (IRA) after filing your taxes, and you don't need to amend your return.
3 Ways to Handle Excess Roth IRA Contributions
You won't face any penalties if you simply withdraw your excess contribution plus any income it has earned by the due date for your tax return, including extensions. But you'll have to include the earnings portion in your taxable income for the year.
How much will a Roth IRA reduce my taxes?
While Roth IRAs don't lower your taxes when you contribute, they allow your money to grow tax-free indefinitely. Eliminating the taxes from your earnings can make a significant difference in your investment balance over time.
The information on Form 5498 is submitted to the Internal Revenue Service by the trustee or issuer of your individual retirement arrangement (IRA) to report contributions and the fair market value of the account.
You can always withdraw the original contributions made to your account at any age without incurring taxes or a 10% early withdrawal penalty. If you withdraw any of the earnings in the account, your withdrawal may be subject to taxes and/or a 10% early withdrawal penalty.
Reporting Roth IRA on taxes
In most cases, you won't need to report your Roth IRA on your income tax return. Because your contributions are made after taxes, you won't report those on your tax return. You also won't have to report your investment growth.
In the case of a Roth 401(k), you contribute with after-tax dollars. So, your employer would include your contributions in box 1 from your W-2. Whether you own a traditional or Roth 401(k), as long as you didn't take out any distributions, you don't have to do a thing on your federal or state return!
The IRS requires the 1099-R for excess contributions to be created in the year the excess contribution is removed the from your traditional or Roth IRA. Box 7 of the 1099-R will report whether you removed a contribution that was deposited in the current or prior year for timely return of excess requests.
Roth IRAs. A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren't deductible (and you don't report the contributions on your tax return), but qualified distributions or distributions that are a return of contributions aren't subject to tax.
IRA dividends are not taxed each year. Traditional IRA dividends are taxed as ordinary income with your principal and any gains when you retire and take distributions. Roth IRA dividends are not taxed at all, since the money you use to fund your account is an after-tax contribution.
A conversion to a Roth IRA results in taxation of any untaxed amounts in the traditional IRA. The conversion is reported on Form 8606 PDFPDF, Nondeductible IRAs. See Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), for more information.
The amount you convert from a traditional account to a Roth account is treated as income—just like all taxable distributions from pretax qualified accounts. Therefore the conversion amount is part of your MAGI, and it may move you above the tax's thresholds.
Do I get a tax credit for contributing to a Roth IRA?
A nonrefundable tax credit is available to eligible taxpayers who contribute to a traditional or Roth IRA or an employer-sponsored retirement plan.
No. You aren't required to do anything with Form 5498 because it's for informational purposes only. Please be sure to keep this form for your records as you'll need this information to calculate your taxable income when you decide to take distributions from your IRA.
Money you put into a Roth IRA is not tax-deductible, meaning you don't report Roth IRA contributions on your tax return, and you can't deduct the contributions from your taxable income. You pay taxes on the money before you put into a Roth IRA, and your investment grows tax-free.
Income: To contribute to a Roth IRA, you must have compensation (i.e. wages, salary, tips, professional fees, bonuses).
Regardless of your age, you will need to file a Form 1040 and show the amount of the IRA withdrawal. Since you took the withdrawal before you reached age 59 1/2, unless you met one of the exceptions, you will need to pay an additional 10% tax on early distributions on your Form 1040.
