IRA Basis

Submitted by IRAQuestion5 on Mon, 2021-03-22 13:37

Hello-

Client was making contributions to a Traditional IRA but in their situation, they were not able to deduct many of the contributions. They were filing the 8606 to record the nondeductible contributions but they did not carryforward and add up the basis being generated.

Therefore, both husband and wife have about $18,000 of basis in their IRAs but they showed $0 on line 2 of the 8606 – total basis in Traditional IRAs. Can they just include the 8606 with their 2020 return and start reporting that line 2 correctly with the total basis? Or do they need to go back and amend all prior 8606 forms?

Thank you!



Submitted by Alan - IRA critic on Mon, 2021-03-22 17:18

They need to amend all incorrect prior 8606 forms, and if there were any distributions taken in 2018 to 2020, a 1040X would also be needed to amend the taxable amount of such distributions. This includes any conversions done in those years. 8606 forms for non distribution years can be filed along with other such amended 8606 forms without a 1040X.

Submitted by IRAQuestion5 on Mon, 2021-04-12 22:38

Thank you for your help! The first nondeductible contribution was made in 2014. Is there a statute of limitation to amend the 8606 to start tracking basis?

Submitted by Alan - IRA critic on Mon, 2021-04-12 23:00

If there is, the IRS has not been enforcing it. They have been accepting retroactive 8606 forms for many more years than just 7, and have not been levying any fine. That said, the taxable portion of any distributions done prior to 2017 cannot be changed due to reporting additional basis prior to 2017. 

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