Forgottten non-deductible traditional IRA contribution
Began taking RMD’s in 2011. Each year, the entire amount of each RMD has been fully taxable.
Just discovered paperwork from 1993 indicating there was a $2000 non-deductible contribution to the IRA and on the 1993 tax return, form 8606 was filed (but this form has not been included in the tax returns since 1993).
What needs to be done to make sure that in tax year 2023, $2000 of this year’s RMD will be non-taxable?
Is it OK to just file the 8606 with the 2023 return even though many RMD’s since 2011 have been taken forgetting about this non-deductible contribution?
Is there anything else that needs to happen?
Thanks!
Permalink Submitted by Alan - IRA critic on Thu, 2023-06-22 18:31
The IRS has not taken the position that the amount that should have been claimed by filing an 8606 with each distribution since 1993 has been forfeited for closed years. Or that you should amend your still open 2021 and 2022 returns to attach an 8606 and receive a small refund for the non taxable portion. I assume that no 2020 RMD was taken due to the waiver for 2020. But you could still amend the last 2 returns to apply the basis and receive a refund. If you don’t want to do that, you would probably be OK with starting in 2023 and showing your IRA basis as 2000. The pro rata calculation will apply a small portion of that basis to 2023. For example, if your basis is 2% of your total IRA balance, then only 2% of your 2023 RMD will be non taxable. You will then have to file an 8606 each year in the future. For such a small amount of recovery each year and such a small amount of basis, you might also choose to just continue as before, avoid the 8606 each year, and report the full RMD as taxable.