Are IRA Statements Required for Taxes?

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Although the Internal Revenue Service requires evidence of your tax-deductible individual retirement account (IRA) contributions, it doesn't require documentation at the time you file your tax return. Even without official documentation, you can still report your contribution and take a tax deduction as your personal situation allows. If you make a non-deductible IRA contribution, you need to include the appropriate form at the time you file your tax return.

Deductible Contributions

  • Because you can make your IRA contribution until April 15 of the following year, IRA custodians don't send out IRS Form 5498, the document that confirms your contribution, until the form's IRS filing deadline of May 31. You don't need the form to report your contribution and take the tax deduction, but you should maintain it with your tax records in case the IRS ever audits your returns.

Nondeductible Contributions

  • If you participate in a company retirement plan and you earn more than the IRS allows for deductible contributions, you can still contribute, but you might not be able to take the full tax deduction. In that case, you need to complete IRS Form 8606 to report the nondeductible portion of your IRA contribution and include it with your tax return.

Recordkeeping

  • The IRS requires that you maintain information supporting a claimed deduction for a minimum of three years. But if you make non-deductible IRA contributions, you should keep a copy of your most recent Form 8606 until you begin taking distributions from your IRA. The information on this form documents your cumulative nondeductible contributions, allowing you to calculate the portion of your distribution that is tax-free.

Considerations

  • If you claim a deduction for your contribution but later learn that you weren't qualified to take it, the IRS gives you until your next tax filing deadline (including extensions) to make the correction without penalty. You'll have to file an amended return to pay the additional taxes owed, but you can likely keep your contribution in the IRA by filing Form 8606 to declare a non-deductible contribution. Alternatively, you can convert the non-deductible portion to a Roth IRA. IRS rules are complex, so check with a tax professional for your particular situation.

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