Roth Distribution Error- no 8606 filed
Fund withdrawn from Roth IRA back in 2012,amount withdrawn was less than total contributions, therefore were contributions, received notice of tax due( not reported and paid) this year, prepared did not do 8606 on 2012 return,ergo the tax, therefor line 43,44,58 and 61 showed correct amount of additional tax due per IRS. Need to correct omission so individual does not have to pay. I assume a 8606 is in order with a letter of explanation?
TKS
SC
Permalink Submitted by Alan - IRA critic on Mon, 2014-04-21 18:26
Yes, an 8606 or revised 8606 is needed with a 1040X. Without that, the IRS will typically assume that the entire distribution is taxable. THe balance in regular contributions must be determined, and if the distribution is more than that balance, then the conversion balance must be determined to complete the 8606 correctly. Of course, if the Roth IRA is qualified, then an 8606 is not needed.
Permalink Submitted by steve jackson on Mon, 2014-04-21 20:27
AMOUNT WITHDRAWN WAS LESS THN CONTRIBUTIONS, WHAT DO YOU MEAN BY QUALIFIED? DO WE STILL DO A 8606 TO CORRECT.tKS
Permalink Submitted by Alan - IRA critic on Tue, 2014-04-22 00:12
A Roth becomes “Qualified” after 5 years has passed since the first Roth contribution AND you reach 59.5. If individual met those requirements there is no 8606 required. Otherwise, an 8606 is needed. If the 1099R had been coded with a Q in box 7, the IRS would not have pursued the taxes.
Permalink Submitted by steve jackson on Tue, 2014-04-22 13:47
If individual was younger than 59.5( held over 5 years) and withdrawls an amount less than or equal to contributions. Is this still considered qualified? And Q in box 7 still appropriate.TksSC
Permalink Submitted by Alan - IRA critic on Tue, 2014-04-22 15:58
It is not a qualified distribution (unless totally disabled), but it is still tax and penalty free. For any individual the distribution of amounts less than the regular contributions made is always tax and penalty free. But an 8606 is needed unless the distribution is a qualified distribution.