Non-IRA Contribution made with no form 8606 Attached to Return
Client made 2012 Non-deductible IRA contribution after return already completed for 2012. Intention is to do Roth conversion for this non-ded. IRA contribution but no form 8606 filed since return was already completed.
If he does a Roth conversion this year for the same amount of the 2012 non-deductible contribution, can he complete an 8606(2012 version)and send with taxes for 2013(year of non-ded. to Roth conversion)? If not, what can he do when he does the small conversion to Roth for same amt. of non-ded. 2012 contribution? client does have rollover IRA already so pro-rata rules exist correct? even if there is no earnings on the 2012 non-ded. IRA contribution made before converted to Roth?
Permalink Submitted by Alan - IRA critic on Thu, 2013-04-11 20:54
Since client has a rollover IRA, his conversion is going to be mostly taxable under the pro rate calculation of Form 8606. One way around these taxes would be to roll his pre tax TIRA balance into his current employer plan if permitted. If this is not possible and if he does not want to pay taxes on the conversion, he could request a return of contribution and not bother to file the 2012 8606. Otherwise, he can convert when he chooses and should send in a stand alone 2012 8606 after May 1st. If he converts in 2013, he will pay taxes on most of the conversion, but can convert any amount he chooses. That amount need not be tied to his 2012 contribution amount.
Permalink Submitted by James Claiborne on Tue, 2013-04-23 16:12
Thanks so much for great explanation. One point of clarification needed. In your reply where you mentioned client could request a return of contribution and not bother to file 2012 8606, this is only if he has actually done Roth Conversion this year correct?
Permalink Submitted by Alan - IRA critic on Tue, 2013-04-23 18:48
No. A return of contribution will eliminate the need for a 2012 Form 8606 because a non deductible contribution will not exist after it has been returned. Any earnings on the returned contribution will be taxable and subject to penalty on the 2013 return because the contribution was originally made in 2013.