Form 8606 – filings in arrears?
I converted a small balance from my Traditional IRA to a Roth IRA in 2018. I made non-deductible contributions to my Traditional IRA at various points in the prior 30 years. I have details tracking my non-deductible contributions. BUT, to the best of my knowledge, I have never filed a Form 8606. [I suppose it is possible that merely by having used TurboTax for my return prep and filing that such forms were indeed filed, but … I no longer have copies of those old tax returns.]
Q1: Should I have filed Forms 8606 (for those 10+ years in which I made non-deductible contributions to my Trad IRA in order for my current year Roth Conversion to be effective?
Q2: If I should have filed them, is there a procedure I can follow to file Forms 8606 retroactively? Does this need to be done before I file my 2018 return or can it be done contemporaneously.
Q3: As indicated, I have detailed records tracking my non-deductible contributions, and I have the correct / accurate information necessary to complete 2018 Form 1040. Am I at risk of jeopardizing my Conversion if I have not filed the proper Forms 8606 timely or in advance of filing my 2018 Form 1040?
Thanks in advance for any thoughtful guidance or suggestions.
B_Parker73
Permalink Submitted by Alan - IRA critic on Tue, 2019-03-05 00:20
If you used a tax program and made a TIRA contribution, it has either been deducted or declared non deductible on Form 8606. To avoid having your conversion fully taxable, you need to go back and file an 8606 for each year that you made a TIRA contribution (not an excess contribution) and did not deduct it. These forms are cumulative and therefore you have to start with your first contribution that was not deducted. This could go back as far as 1987. The IRS has been accepting these retroactive forms without a penalty or fee, as long as you do not overstate your TIRA basis. If there are years you DID file an 8606 after years that you did not, then you must also revise the 8606 forms you filed. If you did conversions or took distributions after 2014, then you must amend those returns to get a refund due to higher correct IRA basis in those years. Each 8606 shows on line 14 the amount of basis carried into future years. When you start with year 1, then line 14 will carry over to line 2 of the next 8606. You do not have to file an 8606 for a year in which you did not make a TIRA contribution or you deducted the contribution. This research could take time, and it is not clear if you can finish it before you file for 2018. Therefore, you probably should file an extension for 2018 so you only have to file once. Not having your IRA basis correct coming into 2018 does not negate your conversion, it just means that the taxable amount will be higher than if you submit retroactive 8606 forms showing more basis than what you show now on your last 8606. You can send in all the old forms through 2017 with a brief note to your tax filing center. Only include your 2018 8606 with your current return.
Permalink Submitted by B_Parker73 on Tue, 2019-04-09 01:31
Alan-iracritic, Thank you for your considered feedback. Clear and thoughtful. I appreciate it. My apologies in not noticing your response sooner. I just wanted to acknowledge the time you made and the thoughtful respose you provided. Sincerely,
Permalink Submitted by Paul Schneider on Tue, 2023-12-19 02:56
(what a fantastic forum!)I am in a similar situation as OP B_Parker73, but my questions are different:
Facts:
Permalink Submitted by David Mertz on Tue, 2023-12-19 03:56
The IRS isn’t going to complain if you unnecessarily pay tax twice on the money. The IRS is cares about underreporting taxable income, not overreporting taxable income. If it simplifies your life to treat your present basis as zero, I don’t see a problem with that. I recently discovered that my father lost track of his basis about 20 years ago and received traditional IRA distributions over many years since then, reported as 100% taxable.