How Do You Report 2023 Roth IRA Contributions On Your Tax Return? The Answer May Surprise You!
Did you make a Roth IRA contribution for 2023? If you have not, you still have some time. The deadline for making a prior year contribution is the tax-filing deadline, not including any extensions you might have. For 2023, that deadline is April 15, 2024.
If you have made a Roth IRA contribution for 2023, or are still planning to make one, you may be wondering where to report Roth contributions on your federal income tax return. The answer may surprise you. Roth IRA contributions are NOT reported on your tax return. When you look at the 2023 Form 1040 and its instructions (as well as all the other schedules and forms that go along with it), you will not find a place to report Roth contributions. You can find a place to report deductible contributions to Traditional IRAs and a place to report nondeductible Traditional IRA contributions. Conversions in 2023 from Traditional IRAs to Roth IRA, including back-door Roth IRA conversions, also need to be reported on the tax return. But there is no place for reporting 2023 Roth IRA contributions.
While you do not need to report your 2023 Roth IRA contributions on your return, it is important to understand that the IRA custodian will be reporting these contributions to the IRS on the 2023 Form 5498. You will get a copy of this form for your own information, but you do not need to file it with your federal income tax return.
Even though you do not need to report your 2023 Roth IRA contributions on your tax return, you should still keep track of them. Your tax preparer (or tax software) can help you with this. Roth contribution information is important when you take distributions from your Roth IRA. Your Roth IRA contributions are always available to you both tax- and penalty-free. These funds are considered to be the first funds distributed from your Roth IRA. Once your contributions are all gone, then converted funds are distributed, and then earnings. If you take a distribution of converted funds from your Roth IRA, there may be penalties that apply. A distribution of Roth IRA earnings can be both taxable and subject to penalty if a Roth distribution is not qualified (i.e., after 5 years and age 59 ½). By tracking your Roth IRA contributions, you can limit your Roth distributions to the amount of your tax-year contributions and thereby ensure that they are always both tax- and penalty-free.
Of course, the best move is to avoid taking any distributions at all from your Roth IRA until you reach retirement age. If you wait and take qualified distributions, then everything in your Roth IRA, including years of earnings, will be tax-and penalty-free. And that, after all, is the goal of saving with a Roth IRA.
By Sarah Brenner, JD
Director of Retirement Education
Ed Slott and Company, LLC
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.