Pre Tax account statements

[RonTrull]

What is the name of your state? Pennsylvania

Hi.
I have pretax investment account statements (simple rollover IRA and 401K) going back to the early 1980's. It is a lot of paper. I am moving to Pennsylvania. I need to downsize. How long should I keep statements? I think that withdrawals are 100% taxable to the IRS and 0% taxable to PA. I can't think of any reason why historical detail of building up the balance would be of any interest.

 

[Foamback]

https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records

Your brokerage company may have some suggestions too.

 

[adjusterjack]

I can't think of any reason why historical detail of building up the balance would be of any interest.

You can't. But someday somebody or some agency might want that information.

Get a scanner with a fast sheet feeder, scan it all on to your computer, back up to a second device, keep them forever.

That's what I do and have no worries about needing something in the future.

 

[Taxing Matters]

What is the name of your state? Pennsylvania

Hi.
I have pretax investment account statements (simple rollover IRA and 401K) going back to the early 1980's. It is a lot of paper. I am moving to Pennsylvania. I need to downsize. How long should I keep statements? I think that withdrawals are 100% taxable to the IRS and 0% taxable to PA. I can't think of any reason why historical detail of building up the balance would be of any interest.

You'll rarely need the whole history of your contributions to a regular (non roth) IRA account or § 401(k) because all distributions from those accounts are taxable income in the year you take the distribution out. Only if you are in the relatively rare situation where you have contributions that were taxed in the year of the contribution would need the records showing all the contributions to the account show you can establish how much of your distributions are a return of basis and thus not taxable income. You'll get a 1099-R for every year you take a distribution from those accounts and that's the document that's going to matter as that has the information you need to put on your tax return.

You are correct that PA generally doesn't tax distributions from IRAs and qualified retirement plans like $401(k) accounts because it taxes the money going into the account instead. That's unusual as nearly other state with an income tax and the federal do just the reverse. Why PA residents don't demand a change in that rule is beyond me. It punishes people working in the state who who pay tax on the income going into those accounts and then if they move to another state they can hit with tax when the distribution is made during retirement. Its help attract retirees from other states to retire there, but it also discourages workers from working in that state which then stifles growth. I used to live in PA and in a lot of ways PA government has just not moved into the modern world.

 

[RonTrull]

Thank you for your replies.

Ron

 

[Foamback]

Only if you are in the relatively rare situation where you have contributions that were taxed in the year of the contribution would need the records showing all the contributions to the account show you can establish how much of your distributions are a return of basis and thus not taxable income.

I’m lost in what you are saying

 

[davew9128]

You are correct that PA generally doesn't tax distributions from IRAs and qualified retirement plans like $401(k) accounts because it taxes the money going into the account instead. That's unusual as nearly other state with an income tax and the federal do just the reverse. Why PA residents don't demand a change in that rule is beyond me. It punishes people working in the state who who pay tax on the income going into those accounts and then if they move to another state they can hit with tax when the distribution is made during retirement. Its help attract retirees from other states to retire there, but it also discourages workers from working in that state which then stifles growth. I used to live in PA and in a lot of ways PA government has just not moved into the modern world.

The Commonwealth of Massachusetts has entered the chat.

 

[LdiJ]

I’m lost in what you are saying

There can be contributions made to a traditional IRA that are non-deductible. I won't go into when that can happen (it's rare), but it can happen. So, if that happens, then that creates "basis" in the IRA. If you have basis in something, then that basis is not taxed when it is withdrawn. However, you have to be able to identify when that basis is withdrawn, so you know when to deduct it from taxable income. That is where historical records can matter.

 

[Foamback]

Thank you. I didn’t know that was possible

 

[Bali Hai Again]

There can be contributions made to a traditional IRA that are non-deductible. I won't go into when that can happen (it's rare), but it can happen. So, if that happens, then that creates "basis" in the IRA. If you have basis in something, then that basis is not taxed when it is withdrawn. However, you have to be able to identify when that basis is withdrawn, so you know when to deduct it from taxable income. That is where historical records can matter.

This happened to me a couple times. I contributed the maximum money into IRA as early a possible to take advantage of greater earnings over time. When doing taxes for that year and due to the fact that I had a workplace retirement plan and my earnings went over a certain threshold for those years I was not qualified to take the full IRA deduction. I simply had the custodian remove the excess non-deductible amount plus earnings before April 15th. I have read that some people intentionally put non-deductible contributions in their IRA on a regular basis. Seems way too complicated for there to be an advantage to do this.

 

[davew9128]

Seems way too complicated for there to be an advantage to do this.

Its not complicated at all. It just means you can over time build more tax deferred wealth and have the (minor) advantage of being able to withdraw a portion of any distribution tax-free due to the basis from the non-deductible contribution.

Also a good way to fund a Roth IRA with a less painful tax hit if you convert the IRA and weren't otherwise able to make Roth contributions.