Forgot form 8606
Hello,
I have a client who did a Rollover from his previous company of both pre-tax and after-tax funds. 274K for pre-tax and 210K for after tax. Both amounts were combined into a Rollover IRA in 2006. The client never submitted a form 8606. The client due to different personal situations took has taken almost all the funds out (around 420K in the last 8 years. The last distribution was for 108K in 2013. What can the client do since its been so long since the rollover was done and most funds have gone out of the account? Thanks!
Permalink Submitted by Alan - IRA critic on Thu, 2014-04-10 18:51
The client has lost the basis that could have been applied if the years are closed to amendment. But 2010 is still open till 4/15 and 2011 and later are of course still open for amended returns. Client needs to go back to the first distribution year after 2005 and reconstruct an 8606 for that year showing the 210k figure on line 2. Completing the form showing the distribution taken that year will result if using up some of that total basis of 210k and other basis from prior 8606 form completed. This is done for each year through 2009, but 2010 is still open for another week to get a 1040X filed using the proper amount of basis for distributions that year. In summary client can apply whatever basis he would have left on 8606 forms for 2010 forward. If 2013 has been filed with the 108k distribution that must also be amended to show a correct 8606 and a refund will be forthcoming. Send 8606 forms for years that are too old to amend together in an envelop to the IRS filing center for client’s state. NOTE: 210k is a large portion of the 401k to be after tax. Client should have evidence in the form of a plan statement from 2006 showing this basis as it will not show up on the 1099R direct rollover. WIthout evidence or if basis is for any reason overstated, fines and penalties can be expected.