NEW YORK (MainStreet) — We’ve all heard the slogan "What happens in Vegas stays in Vegas." When it comes to an IRA, the same rule applies for income tax reporting: What happens in your IRA stays in your IRA.
It's the same with any employer or self-employed pension plan. Clients have often told me, “I lost $50,000” or “I lost $200,000” in an IRA or 401(k). But other than sympathize with their plight there is nothing I can do about it on their 1040.
An IRA, or any retirement account, is a separate legal entity — a tax-exempt trust. While the activity of the account may need to be reported to the IRS or others by the trustee, “beneficiaries” of the trust do not report the account activity on their individual federal or state income tax returns.