Reporting Roth conversions and recharacterizations

Submitted by Bruce Steiner on Tue, 2014-05-27 19:24

Taxpayer never made any nondeductible contributions, so he has no basis in his traditional IRA.

1. Before 2013, he converted some of his traditional IRA to a Roth. He reported the full amount of the conversion on Form 1040, but didn’t attach Form 8606. Should he file Form 8606 now? If so, should he file it separately, or attach it to a Form 1040X?

2. In 2013, he converted some more of his traditional IRA to a Roth. He put his 2013 income tax return on extension. Then he recharacterized some of the amount he converted (together with the appropriate portion of the investment return on it). Does he file a Form 8606 with his 2013 return, and attach a separate sheet of paper showing the amount converted and the amount recharacterized?



Submitted by Alan - IRA critic on Tue, 2014-05-27 21:08

  1. Bruce, he should file a (year of conversion) 1040X adding Form 8606. On the 1040X TP should explain that the conversion income had already been reported and therefore there is no change in taxable income.
  2. Yes, correct. Since he recharacterized only a portion of the 2013 conversion, an 8606 should be included to report the amount of the conversion that was retained. An explanatory statement should be included with the return indicating the amount and date(s) of the original conversion, the date amount of that conversion that was recharacterized and total value of the transfer back to the TIRA (including the earnings).

  

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