Noncompleted IRA contribution
In reviewing the tax returns for a new client, I noticed that the form 8606 reported a nondeductible IRA contribution in 2013 however the IRA statements do not show the contribution activity. When I asked the client, they said that they never made the contribution. What is the consequence for reporting a nondeductible IRA contribution that never actually happened? Should I suggest that they amend their 2013 form 8606?
Thanks
Permalink Submitted by Alan - IRA critic on Fri, 2015-02-20 17:15
Yes, it should be amended to delete the report of a non deductible contribution if client did not make one. Is client sure that he did not make one to a different IRA account than the statements you are reviewing? There is a potential $100 penalty for overstating IRA basis per Pub 590 A, but if the client amends before the IRS notices that no contribution was made. the IRS will probably not pursue the penalty.