Filed form 8606 when not needed - should I amend?

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intangible
Posts: 2
Joined: Tue Apr 19, 2016 9:11 pm

Filed form 8606 when not needed - should I amend?

Post by intangible » Tue Apr 19, 2016 9:28 pm

Hello Forum,

A new member here. I realized a mistake on my 2014 federal tax returns while doing 2015 returns.

Apparently while doing 2014 tax returns using TaxAct, I did a what-if analysis on back-door Roth conversion. I entered $5500 each in non-deductible IRA contributions for myself and spouse to see how it affects tax returns. TaxAct duly generated separate copies of form 8606 for both of us with $5500 on line 14. Now, I forgot about this at the time of submitting my tax return so IRS received these 8606 with $5500 as cost basis. :oops: However, we never made any contributions to non deductible IRAs nor have made any in the past or 2015. We did not file 8606 for 2015 since there were no non-deductible IRAs to report.

So, in my situation, do I need to submit a corrected/amended form 8606 for 2014 for both myself and spouse?
If yes, is paper filing the corrected 8606 my only option?
Since there is no impact to 1040, do I need to file 1040X as well?
And, is this situation considered overstating the cost basis and will this mean I have to pay $100 penalty for each amended 8606. :annoyed

Many thanks for your time and suggestions.

gd
Posts: 1226
Joined: Sun Nov 15, 2009 8:35 am
Location: MA, USA

Re: Filed form 8606 when not needed - should I amend?

Post by gd » Wed Apr 20, 2016 6:14 am

No clue what you *need* to do, but if you're going to wonder about it until retirement, just submit the 1040X. It's easy, since all the numbers are the same, with an explanation in Part III and the revised 8606 attached. What's the worst that can happen-- a few clerks you'll never meet laugh at you on their lunch break? You're out an hour, a stamp, envelope and a few pages printed, never to give it another thought. But do it before 3 years.

Wagnerjb
Posts: 7015
Joined: Mon Feb 19, 2007 8:44 pm
Location: Houston, Texas

Re: Filed form 8606 when not needed - should I amend?

Post by Wagnerjb » Wed Apr 20, 2016 10:35 am

My understanding is that you don't need to file 1040X since there is no impact to the tax liability. I recently corrected a Form 8606 from a few years ago, and the filing was done by KPMG....and they did not include a 1040X with the amended Form 8606 since there was no change in tax liability.

Best wishes.
Andy

clydewolf
Posts: 666
Joined: Tue Jul 21, 2015 12:51 pm

Re: Filed form 8606 when not needed - should I amend?

Post by clydewolf » Wed Apr 20, 2016 2:16 pm

You made no after tax contribution to your IRA.
There was no 5498 issued by your IRA custodian to match-up with your errant 8606.

You could go ahead and file the amended 8606, but it probably is not necessary.

intangible
Posts: 2
Joined: Tue Apr 19, 2016 9:11 pm

Re: Filed form 8606 when not needed - should I amend?

Post by intangible » Wed Apr 20, 2016 2:59 pm

Dear forum members,

Thank you for weighing in with your opinions. Very much appreciated. Would you know the answer to the penalty subquestion?

Is this situation considered overstating the cost basis and will this mean I have to pay $100 penalty for each amended 8606?

Chuck
Posts: 1876
Joined: Thu May 21, 2009 12:19 pm

Re: Filed form 8606 when not needed - should I amend?

Post by Chuck » Wed Apr 20, 2016 3:14 pm

You will not have to pay anything (penalty) if the amount of tax does not change. You are just correcting a paperwork mistake. I am not a tax attorney. But I left off a 1099-B, and filed a 1040X to add it and nothing happened. (Because of capital loss carryovers, there was no effect on my tax owed.) I just got a letter 6 months later that basically said "fine."

The reason I would file the amendment is that you have made a false statement. And you signed a thing that says "under penalty of perjury, this is correct to the best of my knowledge" or something to that effect.

scooters
Posts: 17
Joined: Tue Jun 23, 2015 4:53 am

Re: Filed form 8606 when not needed - should I amend?

Post by scooters » Sat Apr 15, 2017 8:20 pm

I discovered I have the same issue as the poster, but I'm not exactly sure what do. The above answers discussed filing amended 8606 forms, but didn't fully discuss having to "unfile" a Form 8606 that should not have been filed.

I accidentally filed an 8606 form for tax year 2015 indicating a $6,500 traditional IRA contribution when in fact a contribution was made but then returned before the due date of tax return. Per the IRS guidance, the Form 8606 should not have been filed for a contribution was returned. Form 1040, Line 15a showed a taxable distribution of $6,500 and Line 15b showed a taxable amount of $0 as expected. In addition, I included an explanation that the contribution was returned. I had no issues from the IRS.

I will not be doing any further contributions or conversions due to other reasons, but there is now $6,500 of basis in this account. I have not yet started distributions, but I would like to avoid this headache in the future.

Should I file a 1040X where I only provide additional information (per p. 6 of the 1040X instructions and explain the situation? Should I just send the IRS a letter letting them know?

scooters

Alan S.
Posts: 6901
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Filed form 8606 when not needed - should I amend?

Post by Alan S. » Sat Apr 15, 2017 8:54 pm

Good chance the IRS would accept a " corrected 8606" for 2015 showing 0 in the appropriate places where other figures were reported in the original, including line 14. Write across the top of it that this contribution was withdrawn with allocated earnings by the due date.

Small chance the IRS will kick it back and ask for a 1040X, so you can do that up front if you want to.

scooters
Posts: 17
Joined: Tue Jun 23, 2015 4:53 am

Re: Filed form 8606 when not needed - should I amend?

Post by scooters » Wed Apr 19, 2017 12:59 pm

Sounds great, thanks so much.

michaeljc70
Posts: 1955
Joined: Thu Oct 15, 2015 3:53 pm

Re: Filed form 8606 when not needed - should I amend?

Post by michaeljc70 » Wed Apr 19, 2017 1:26 pm

Wagnerjb wrote:My understanding is that you don't need to file 1040X since there is no impact to the tax liability. I recently corrected a Form 8606 from a few years ago, and the filing was done by KPMG....and they did not include a 1040X with the amended Form 8606 since there was no change in tax liability.

Best wishes.
There is a potential impact to tax liability. Just not in the year he filed it. I would amend the return.

Alan S.
Posts: 6901
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Filed form 8606 when not needed - should I amend?

Post by Alan S. » Wed Apr 19, 2017 5:21 pm

intangible wrote:Hello Forum,

A new member here. I realized a mistake on my 2014 federal tax returns while doing 2015 returns.

Apparently while doing 2014 tax returns using TaxAct, I did a what-if analysis on back-door Roth conversion. I entered $5500 each in non-deductible IRA contributions for myself and spouse to see how it affects tax returns. TaxAct duly generated separate copies of form 8606 for both of us with $5500 on line 14. Now, I forgot about this at the time of submitting my tax return so IRS received these 8606 with $5500 as cost basis. :oops: However, we never made any contributions to non deductible IRAs nor have made any in the past or 2015. We did not file 8606 for 2015 since there were no non-deductible IRAs to report.

So, in my situation, do I need to submit a corrected/amended form 8606 for 2014 for both myself and spouse?
If yes, is paper filing the corrected 8606 my only option?
Since there is no impact to 1040, do I need to file 1040X as well?
And, is this situation considered overstating the cost basis and will this mean I have to pay $100 penalty for each amended 8606. :annoyed

Many thanks for your time and suggestions.
Yes, you overstated your cost basis. Earlier, I thought you had removed the contribution but it is clear that you never made the contribution in the first place. Either way, you currently have an overstated cost basis. The corrected 2014 8606 form for each of you should state that you never made a contribution for 2014, not that you removed the contribution.

wrongfunds
Posts: 826
Joined: Tue Dec 21, 2010 3:55 pm

Re: Filed form 8606 when not needed - should I amend?

Post by wrongfunds » Thu Apr 20, 2017 8:46 pm

Don't worry, just to even the score, I forgot to file my 8606 :-) I actually went to ammend but TurboTax told me there was nothing to amend! So I just sent the missing forms and called it a day.

Alan S.
Posts: 6901
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Filed form 8606 when not needed - should I amend?

Post by Alan S. » Thu Apr 20, 2017 10:03 pm

wrongfunds wrote:Don't worry, just to even the score, I forgot to file my 8606 :-) I actually went to ammend but TurboTax told me there was nothing to amend! So I just sent the missing forms and called it a day.
You lost me here. If you never made the contribution and never filed an 8606 to report a ND contribution or took a deduction for a contribution, there is nothing to be done. What missing forms did you send?

wrongfunds
Posts: 826
Joined: Tue Dec 21, 2010 3:55 pm

Re: Filed form 8606 when not needed - should I amend?

Post by wrongfunds » Fri Apr 21, 2017 8:40 am

We made non-deductible contribution like we do every year but this year I forgot to tell that to TurboTax. It did not generate the Form 8086 showing the updated basis when I e-filed. So I sent the paper copy of the filled out 8086 via postal mail.

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