Missing form 8606
I recently discovered that last year’s tax return apparently didn’t include an 8606.
(based on TurboTax generated PDF)
I made no non-deductible contributions, have no basis (no after-tax) in my TIRA, but did a back-door conversion (to Roth). I did not take any Roth distributions. The 5498 has since reported the conversion. At this point I prefer to let “sleeping dogs lie” and make the corrections on my next tax return OR must I re-file ?
Please Advise
Thanks, Ron
Permalink Submitted by Alan - IRA critic on Mon, 2021-12-13 17:27
If you converted, it should have been reported on Form 8606, whether the conversion was taxable or not. Even if the distribution was reported on Form 1040, line 4, and your taxable income is correct, the IRS should take note of the 5498 discrepancy, but since their current processing is far behind, it could be some time before you hear from them. As a compromise, you might try avoiding a 1040X by sending in a stand alone 8606 showing the conversion in Parts I and II. An 8606 has signature lines, and you could also note on the form that the taxable income on your 2020 return did not change by filing the 8606 that was omitted.
The problem here is not only not reporting the conversion, but it’s not clear whether your distribution should have been taxable or not since you did not indicate what amount of IRA basis you have from any prior non deductible contributions. If you choose to file the 8606, be sure your numbers are correct.
Permalink Submitted by Ron Corcoran on Tue, 2021-12-14 16:22
My TIRA is funded completely by rollovers, no contributions ever so there is no history of TIRA value as of previous year. I’m not opposed to adding part 1, just not if it’ll complicate things at this point. If I follow the past, I’d just fill in lines 16 & 18 (part 2 only). Not sure what you think about that AND should I mail to Kansas City, Mo ? That is the normal address for 1040’s from my state (CT). I saw another IRS site-page that had specific addresses based on form numbers but the 8606 was not listed there. Oddly the form itself acknowledges “being filed by itself and not with .. tax return”. Better yet, is there a way to file it on-line ? Not sure the later would work for me anyway sine I’d like to include a short letter of explanation (per your advice).
Permalink Submitted by Ron Corcoran on Tue, 2021-12-14 16:50
In past few years .. both line 4a & 4b are populated with my distribution / Roth conversion. It seems it’s not required tho .. https://www.irs.gov/pub/irs-pdf/i1040gi.pdf. In any case I hope that’s not significant enough to warrant a refile of the 1040. Thank You
Permalink Submitted by Alan - IRA critic on Tue, 2021-12-14 17:34
The line 4a and 4b instructions indicate that for conversions line 4a should be completed, although Form 8606 does not mention 4a, just 4b. Therefore, your past 1040 forms have been correct, and the IRS sees the taxable income reported for your IRA distribution. Apparently, many of these situations are never questioned by the IRS, although a lesser amount are. The IRS would see the issue if their systems attempted to match Form 5498 conversion contributions with an 8606. If you want to preempt any future IRS inquires, you should file each 8606. I don’t think there is a way to file them on line. That said, if you do nothing, good chance you will never hear from the IRS. And they know the amount of your Roth conversions from the 5498 forms.
A few people have rolled over after tax contributions to a TIRA, which should be reported on line 2 of Form 8606 to avoid double taxation. Otherwise, your missed 8606 forms would only need Part II, not Part I. If you choose not to file the 8606 forms, at least be sure to keep your 5498 forms, and keep track of your Roth IRA basis in order to be able to complete Part III if you ever take a NQ Roth IRA distribution, or Form 5329 if you distribute a conversion before it reaches 5 years or you reach 59.5.