incorrectly filed 8606 for 2019 tax, how to amend?
I did a conversion from a non-deductible traditional IRA to Roth IRA in 2019. My tax consultant filed 8606 incorrectly as a result of which the IRS treated it as an early distribution and sent me a letter to pay for the deficiency. The letter says that I can either pay the difference or challenge it in the tax court by Jan 2022. However, my tax consultant says that I should first file an amendment. If the IRS accepts it then they will send a letter. If I dont get a letter until Jan 2022 I can then challenge it. Is this a good approach ? Can I just submit an amendment and ignore the deficiency letter? Or is it safer to pay them first and then file an amendment?
Permalink Submitted by Alan - IRA critic on Sat, 2021-11-20 03:15
Perhaps the accountant failed to complete Part II of the 8606, but note that all your non Roth IRA accounts are treated as one combined account for 8606 purposes, so be sure that line 6 of the 8606 is completed correctly. This might more clearly illustrate to the IRS the correct amount of taxable income for the conversion. It is quite possible that both the 8606 and the IRS are incorrect for different reasons. I think it is a good idea to file the 1040X for 2019 ASAP, and send a copy of that 1040X to the examiner if the result differs from what the IRS is basing their tax bill on. Current service from the IRS is unsatisfactory, so you might consider how much the loss of these funds for a considerable time will affect you. I can’t tell you what the IRS will do if you do not pay the difference promptly, but if they are wrong, it could take a considerable time to get your refund.
Permalink Submitted by St Watson on Sat, 2021-11-20 13:04
Thanks for the prompt response. The difference comes to ~$2K, which is OK even if takes longer to get a refund in case their calculation is wrong. Thats why I am weighing between paying first and then filing the amendment v/s filing the amendment first and waiting till Jan. But I dont want to leave the IRS deficiency letter without a proper closure.
Permalink Submitted by St Watson on Mon, 2021-11-22 18:28
For 2020 also f8606 was incorrectly filed with the tax return. Even though the corrected 8606 does not change the taxable income, I would like to submit the corrected 8606 form. Can this form be submitted by itself now? Does the new form override the earlier one that was submitted with the 2020 return?