CPA forgot to file form 8606
A client decided to convert their $700,00 IRA to a Roth IRA and wanted to recognize the entire conversion in 2010. The CPA did recognize the income on the 2010 tax return and included it in the client’s taxable income but failed to complete form 8606 acknowledging that intent. The client was on extension so the return is technically not due until Monday but the return has already been filed. The CPA cannot find guidance on how to remedy the issue. Should the CPA mail form 8606 in by Monday with a letter of instruction, should an amended return be filed or should some other course of action be taken?
Any guidance available would be most appreciated!
Permalink Submitted by Alan Spross on Fri, 2011-10-14 22:57
A 1040X would be quite simple in this case because there is no calculations. Just complete a correct 8606 and check the opt out box on line 19, add an explanatory statement on the space provided and get it postmarked by 10/17.
I thought all CPAs used tax software these days. Anyway, if the 1040X is late I have no idea whether the IRS would require splitting the income or would accept the original return as intent to opt out. The 1040X should also indicate “filed pursuant to Sec 301.9100-2” on it, which documents the intent to use the extended due date option for making the change (or documenting it).
Permalink Submitted by Jeffery Acheson on Fri, 2011-10-14 23:01
Beautiful, thank you very much!
Permalink Submitted by Rose Shy on Sun, 2017-04-23 16:50
My husband died in 2012. I disclaimed his traditional IRA’s after doing a $40,000 conversion to a Roth and doing his RMD. The accountant did the split on the basis to the two children. I just found out they have never used the form 8606. How can this me rectified? They did the RMDs in 2013, 14, and 15. This year it will be for 2016.
Permalink Submitted by Alan - IRA critic on Sun, 2017-04-23 18:30
I don’t know why the IRA custodian accepted the disclaimer if you converted some of the inherited IRA. In order for the IRA to be disclaimed, the only distribution you are allowed to take is the year of death RMD for your husband. In any event, each beneficiary can send in an 8606 for 2013 but 2013 is now a closed tax year. They can then amend 2014-present returns to claim the amount of basis calculated on the 8606 for that year.