Form 8606 filed but does not show ROTH conversion
I have a new client for 2022 tax season. In reviewing the 2021 return, I see the following:
1. Form 1099-R for distribution of $6,000 with code 2
2. Form 8606 filed showing nondeductible IRA contribution of $6000 (line 1, 3 and 5) and distribution of $6000 (line 7, 12 and 13).
The Form 8606 is blank on lines 8 and 11, no further indication of ROTH conversion. Therefore the 8606 makes it look like the client contributed $6000 and then took it back out, period.
I am not sure yet as to how many years the client has done a back door ROTH conversion. Should I file amended Forms 8606 for any and all years that the ROTH conversion was not reported?
I know there is no change to the “bottom line” on the tax return. I was advised in a previous forum question to not file amended Form 8606 for reporting missed non-deductible contributions. Just don’t know how important it is to report the ROTH conversions in prior years.
Thank you in advance!
Permalink Submitted by Alan - IRA critic on Fri, 2023-02-03 22:35
The 1099R and 5498 provide documentation to the IRS that a conversion was done, but it’s not clear to what extent the IRS uses Form 8606 to track conversion amounts and years. It’s safer to file a 1040 X for 2021 with a corrected Form 8606 Part I indicating a conversion and completed Part II. Meanwhile, client should be sure to retain the 1099R and 5498.