IRA Contributions Not Deducted

Submitted by Brandon Blanchard on Thu, 2023-10-12 14:25

Hi,
I have a new client that has a payroll deduction IRA. She has been funding her IRA through payroll deduction every year since 2015. In analyzing her tax returns, I discovered that her CPA has not deducted any of her IRA contributions for tax years 2015-2022.

I think the CPA can only amend the 2020, 2021 and 2022 returns at this point (and take the IRA deduction), is that correct? I think there is a 3 year window to amend returns. What should the CPA do about 2015-2019 and the IRA deductions that weren’t taken for those years? Can the CPA note the 2015-2019 contributions as basis in the IRA so the client doesn’t pay taxes on the same money twice?



Submitted by Brandon Blanchard on Thu, 2023-10-12 14:29

I should also note that there is no 8606 in the returns for my client and she was eligible to deduct the IRA contributions each tax year 2015-2022. 

Submitted by Alan - IRA critic on Thu, 2023-10-12 17:23

  • Yes, only the last 3 years can be amended to request a refund. 
  • For the 2015-2019 years instead of filing an 8606 for each year, suggest that when the 2022 return is amended $100 of the 2022 contribution is not claimed as a deduction, but used to generate a 2022 8606 which can show 100 as a ND contribution and the total of the 2015-2019 ND contributions on line 2 of that 8606. Further, the explanation section of the 1040X can be used to explain the amount shown on line 2 is derived from 2015-2019 IRA contributions that were not deductible, but never claimed as IRA basis on a prior Form 8606. The purpose of leaving 100 as ND for 2022 is to generate this single 8606 which will update the IRA basis to the present and provide room for an explanation. 

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