ROTH IRA distributions-8606 tax form
I recently efiled my 2007 tax return. I had taken some ROTH IRA distributions that included both contributions and pre-2003 conversions so the distributions were income tax free. However I reported on the 8606 tax form that the distributions were completely from contributions. The amount reported on the contribution line is more than the total contributions that could have been made since the ROTH IRA came into existence in 1998.
So I am sure I will get a letter from the IRS asking for an explanation of the large amount of reported ROTH IRA contributions on the 8606. Should I go ahead and change the ROTH IRA reported contributions to the correct amount of contribution and conversion amounts and mail the revised form to the IRS before Apr 15?
Can I revise it and send the 8606 form in by itself with a note of brief explanation? Will that be sufficient to hopefully stop an inquiry letter from the IRS about it? Any advice about how to proceed would be much appreciated. Thank you!
PG
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Permalink Submitted by Alan Spross on Tue, 2008-02-26 21:38
You should amend the 8606 to the correct totals even though it will not change your return since the conversions met their 5 year requirement. You probably would not get a letter for a couple years if at all, but leaving the incorrect subtotals on the form could lead to unintended consequences many years down the road.
While you could probably amend it on a stand alone basis, I think I would wait until after 4/15 and then amend it with a 1040X on which you can make your explanatory statement.
I also suggest first making a Roth tally sheet for yourself showing your cumulative totals of regular contributions and conversions by year starting back in 1998. Also show the year of any distributions and which account they came out of, so you will always have a current breakdown of regular contributions, conversions and earnings.
In the event that your distribution involved the first home exception, please advise, since that opens up some related complexities in your reporting.