Amend 8606?
Hello-
Client made a Roth contribution. It was reported on their timely filed return as a Traditional IRA contribution. $4,000 was deductible and $2,000 was recorded as a non-deductible contribution.
We are going to recharacterize the $4,000 plus earnings (about $3,000 after losses) and leave the other $2,000 of the contribution in the Roth. Therefore, there should not have been an 8606 filed even though it was included with the 2021 return. Do we need to file an amended 8606 that just has everything blank or do we just not include any basis from the 2021 on future returns going forward?
We do not have to amend the rest of the 2021 return at all correct? Or include anything on the 2022 return for the recharacterization?
Thank you!
Permalink Submitted by Alan - IRA critic on Mon, 2022-07-11 17:38
It appears that client, perhaps influenced by the 25% loss on this contribution, wants to recharacterize 4000 of the Roth contribution as a TIRA contribution in order to secure the IRA deduction. Suggest client file a 1040 X with a blank 8606, and include an explanatory statement detailing the partial recharacterization and explaining that there was no non deductible TIRA contribution made. There would not be any change in the taxes due from the already filed return.
Permalink Submitted by David Mertz on Mon, 2022-07-11 17:50
Rather than leaving the Form 8606 entirely blank, I would put zeros on the lines previously showing the dollar amounts that are changing. That would make the change explicit. I agree with including Form 1040-X to provide explanation and to show that there is no change to any other part of the tax return.
Permalink Submitted by IRAQuestion5 on Mon, 2022-07-11 20:18
The client’s original return reported the contribution as a Traditional IRA contribution erroneously. Now we are correcting that by recharacterizing the part of the Traditional IRA that was deductible. Since the original return included the contribution do we have to file the 1040x at all or can we just file standalone 8606 removing the nondeductible contributions?
Permalink Submitted by Alan - IRA critic on Mon, 2022-07-11 21:56
See the other thread which explains the technical and practical reasons for filing the 1040X, to which the corrected 8606 should also be attached. Good idea to place 0s where the corrected numbers were on the first 8606.