Filing Form 5329 and 8606 without amending with a 1040X

Submitted by John Williams on Thu, 2018-08-02 00:54

In 2015 I had a trustee to trustee transfer of a Roth, but it got titled a TIRA at receiving bank, and I just caught it. I have basically giving up on getting the bank to fix this. S as advised I am treating it as a Roth distribution and excess contributions for 2015 going forward by claiming it as nondeductible contributions. Since I made no TIRA contributions in any of those years and entitled to take $6500 each year, I am going to carry it forward until the $20000 is reported. I will pay the 6% excise tax each year on form 5329, and report the nondeductible status each year on 8606.
My first question is if it is advisable to file these as stand alone forms or with a 1040X? It seems like without a 1040X I might get less scrutiny, but 1040x has place for explanation. Can I just a an explanation page to the stand alone forms? I see on this forum the suggestion that sometimes the standalone is accepted, other times IRS ask for a 1040X. Those discussions were not about paying excise tax on a 5329 for nondeductible contributions. So if I did a 1040X it would show no tax due change as not deduct it. The 5329 would show excise tax due with payment attached. So thinking of filing the 5329 and 8606 together for each year with no 1040X with explanation sheet attached. What do you think?

One question with lines on 5329. Since first year with an excess for 2015 I would enter 0 on line 9. I made no contributions for and no distributions for 2015 so will end 0 on line 10-13. Question is if line 14 should enter 13500 (20000-6500). with line 15 being 6% x 13500. Then in year 2016 what would be on each line if line 10-12 were still 0 so could use up another $6500 to reduce excise tax

I hope some one can help so I can get this done while it will still be a voluntary disclouse before I hear from the IRS contacts me.
Also wonder if this usually results in an audit.



Submitted by Alan - IRA critic on Thu, 2018-08-02 01:55

  • Since there is no template to “fix” such a situation and the IRS has no 1099R or 5498 for 2015, although this solution is logical you may have to explain all the past history to the IRS, and then hope they accept the submitted forms without going off in an entire different direction. I would file a 1040X for at least 2015 because that is the year you will have to provide a detailed explanation, report the 20,000 Roth distribution on Form 8606 and the 20,000 ND TIRA contribution in Part I of that same 8606, as well as the excise tax on Form 5329.  If the IRS accepts that 1040X and attachments, you can probably get away with just a stand along 5329 for 2016 and 2017. I assume you made NO regular TIRA or Roth IRA contributions for these years or your 5329 forms will change with excess amounts you cannot apply.
  • For 2015 5329, lines 10, 13, and 15 will be 13,500 and you will owe the 6% on that amount (less if your year end value of all TIRAs was lower).  2016 excise tax will be on 7,000 and 2017 will be on 500. You will also need a 2018 5329 showing that the remaining 500 excess was eliminated if that is the case. You will then have a 3 year statute of limitations on each of those 5329 forms.
  • The IRS will probably accept your approach once they understand the total picture because you are self reporting the error and paying the freight.

Submitted by John Williams on Thu, 2018-08-02 19:21

Starting with your advice for year 2015 on form 5329, I proceeded to fill it out for 2015 & 2016 as explained below. But I am clearly doing somwthing wrong and irs instructions not help.

  •                    2015                                                  2016
  • line 9             0                                                        13500 (instructions say senter from line 16 , 2015)
  • line 10      13500                                                      7000
  • line 11           0                                                               0
  • line 12           0                                                               0
  • line 13      13500                                                       7000
  • line 14           0                                                           6500 (subtract libe 13 from line 9)
  • line 15       13500                                                       7000
  • line 16       13500                                                      13500( intuitively should be 7000 as Alan suggested)
  • line 17            810                                                          810 (should be 420)

I read the instructions but do not correctly understand what line10  & 15 represent, but I must have entered something wrong on those lines if 2016 did not have 7000 on line 16.  Not sure, but it seems to work out for year 2015 becline 9 is 0.If someone can please correct what I did wrong with 2016, I should be able to get 2017 & 2018 right.Thank You.

Submitted by David Mertz on Thu, 2018-08-02 22:27

I see the Form 5329 entries should be as follows:

  •                    2015                                                  2016
  • line 9             0                                                     13500
  • line 10           0                                                       6500
  • line 11           0                                                           0
  • line 12           0                                                           0
  • line 13           0                                                       6500
  • line 14           0                                                       7000
  • line 15       13500                                                      0
  • line 16       13500                                                  7000
  • line 17           810                                                    420

Submitted by Alan - IRA critic on Fri, 2018-08-03 00:29

I provided the wrong figure for line 10, and therefore line 13 is also wrong. They should be 0 as DMx indicated. These lines function to apply space from not making a contribution to reduce the excess from a prior year. There was no excess at the end of 2014 to reduce. The allowed contribution for 2015 was 6500, and that contribution is considered to have been made as part of the 20,000 error being treated as a regular TIRA contribution for 2015. That leaves an excess amount for 2015 of 13,500 on which the 6% excise tax is due.

Add new comment

Log in or register to post comments