Roth Conversions & Form 8606
Hi,
I have many clients that did Roth conversions in 2020. I am noticing that many of their tax returns don’t include a form 8606.
Is a form 8606 always needed when there is a Roth conversion? That is my understanding.
One CPA is telling me that an 8606 is only needed for a Roth conversion if there were nondeductible IRA contributions in prior years (basis). But the IRS website seems to contradict this CPA.
Permalink Submitted by Alan - IRA critic on Mon, 2021-07-19 23:46
The CPA is wrong. Form 8606 is required when non deductible contributions are made for the tax year AND for any conversions, regardless of the portion of the conversion that is taxable. Many tax programs complete a worksheet that substitutes for lines 6-12 of the 8606, which are left blank, and this is OK with the IRS. As for conversions that are not reported on an 8606 at all, but the correct distributions are reported on lines 4a and 4b of Form 1040, it is not clear that this result in problems down the road. The Roth custodian will still issue a 5498 showing a conversion contribution, so perhaps the IRS is letting this slide until their service situation returns to normal.