Haven't filed my Nondeductible IRA form 8606

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lxr184
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Joined: Fri Nov 02, 2018 12:18 pm

Haven't filed my Nondeductible IRA form 8606

Post by lxr184 » Fri May 31, 2019 12:41 pm

I made some nondeductible traditional IRA contributions in 2007 and 2008 (total basis of 9000). Yesterday, I was going through my old taxes and noticed that my accountant filed the 8606 in 2008, ..., and 2011, but never since then. What do I do now. Should I just tell him to file again in 2019 and check from now on that it's being done every year, or it is a bigger issue than that.

Alan S.
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Re: Haven't filed my Nondeductible IRA form 8606

Post by Alan S. » Fri May 31, 2019 12:58 pm

lxr184 wrote:
Fri May 31, 2019 12:41 pm
I made some nondeductible traditional IRA contributions in 2007 and 2008 (total basis of 9000). Yesterday, I was going through my old taxes and noticed that my accountant filed the 8606 in 2008, ..., and 2011, but never since then. What do I do now. Should I just tell him to file again in 2019 and check from now on that it's being done every year, or it is a bigger issue than that.
Start with the first year that you are sure your contribution was non deducted and complete an 8606 using that year's edition. You can usually locate these forms on the IRS prior years Forms and Pubs lists. Since this starts in 2007, it means that all 8606 forms that were issued after 2007 are incorrect because they do not show prior basis on line 2. Those forms need to be revised. You should not file an 8606 if you did not make a contribution in a year and did not take a distribution. Send the new and revised 8606 forms needed to your IRS filing office with a brief note that explaining the prior omissions.

If you took a distribution or did a conversion in the last 3 years, your basis was incorrect when reporting the distributions, so you would need to file a 1040X to amend those years. That would generate a small refund for those years.

Topic Author
lxr184
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Re: Haven't filed my Nondeductible IRA form 8606

Post by lxr184 » Fri May 31, 2019 1:49 pm

Just to clarify, I only made non-deductible contributions of 4000 in 2007 and 5000 in 2008. I never made any non-deductible contributes before or since then (most of my contributions are traditional SEP IRA contributions in a different account. I also never took any distributions. I just basically want IRS to know that my basis for my IRA accounts is 9000 so that when I do retire, I don't have to pay taxes on that 9000 again.

Alan S.
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Re: Haven't filed my Nondeductible IRA form 8606

Post by Alan S. » Fri May 31, 2019 2:43 pm

lxr184 wrote:
Fri May 31, 2019 1:49 pm
Just to clarify, I only made non-deductible contributions of 4000 in 2007 and 5000 in 2008. I never made any non-deductible contributes before or since then (most of my contributions are traditional SEP IRA contributions in a different account. I also never took any distributions. I just basically want IRS to know that my basis for my IRA accounts is 9000 so that when I do retire, I don't have to pay taxes on that 9000 again.
Why then was an 8606 filed for 2011?
No 8606 Parts I and II should be filed unless there is a ND contribution or a distribution. If the only ND contributions were in 2007 and 2008, none thereafter and no distributions thereafter, then only 2007 and 2008 is required.

When you finally take distributions from any non Roth IRA account, you must pull up your most recent 8606, even though that can be several years back, get the figure for your total basis on line 14, and enter that figure on line 2 of the 8606 you file for the distribution year.

If many years pass and you purge old tax returns, be sure to save your last 8606 so you will have the needed figures.

jebmke
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Re: Haven't filed my Nondeductible IRA form 8606

Post by jebmke » Fri May 31, 2019 4:56 pm

Alan S. wrote:
Fri May 31, 2019 2:43 pm
If many years pass and you purge old tax returns, be sure to save your last 8606 so you will have the needed figures.
And do your spouse a favor and put a copy of your last 8606 in your "if I die or become incapacitated" notebook. I can't tell you how many surviving spouses come to our TaxAide tax preparation sites with very limited or no information on tax basis of capital assets and IRAs.
When you discover that you are riding a dead horse, the best strategy is to dismount.

livesoft
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Re: Haven't filed my Nondeductible IRA form 8606

Post by livesoft » Fri May 31, 2019 5:26 pm

lxr184 wrote:
Fri May 31, 2019 12:41 pm
I made some nondeductible traditional IRA contributions in 2007 and 2008 (total basis of 9000). Yesterday, I was going through my old taxes and noticed that my accountant filed the 8606 in 2008, ..., and 2011, but never since then. What do I do now. Should I just tell him to file again in 2019 and check from now on that it's being done every year, or it is a bigger issue than that.
Let me ask this directly:

Why did the accountant file Form 8606? One reason would be that you made non-deductible IRA contributions for that tax year. So for that reason, one would have Form 8606 for 2007 and 2008, but not for 2009, 2010, 2011 nor since. So why did the accountant file in years 2009, 2010, 2011? Maybe just to charge you more money?

Did the 8606 in 2008 show evidence of the 2007 and 2008 non-deductible contributions? What is the difference in the 8606 forms of 2008 and 2009, 2010, and 2011?
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Topic Author
lxr184
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Re: Haven't filed my Nondeductible IRA form 8606

Post by lxr184 » Fri May 31, 2019 6:04 pm

I guess I misunderstood how this process works. When I read that it was my responsibility to keep track of the basis, I thought it mean filing a form every year regardless of wether something changed. Since there were no changes, it explains why it hasn't been filed lately. Not sure why it was done multiple times years ago. Maybe I confused my accountant by reminding him about my basis each year so he file it. Thanks for clearing that up for me.

Pancho
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Re: Haven't filed my Nondeductible IRA form 8606

Post by Pancho » Fri May 31, 2019 6:32 pm

lxr184,
Thank you for asking this question. I had also misunderstood the process and found this thread very helpful.

OhioGozaimas
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Re: Haven't filed my Nondeductible IRA form 8606

Post by OhioGozaimas » Sat Jun 01, 2019 1:29 am

The info in this thread is very helpful, but it does not seem very clear/obvious in the Wiki. Following is a possible editing of the Wiki entry.

How do I make non-deductible contributions to a traditional IRA?

You make non-deductible contributions to a traditional IRA by sending money to an IRA custodian of your choice. You do not need to notify the IRA custodian that you are making non-deductible contributions. However, you do need to notify IRS that you have made non-deductible contributions to a traditional IRA with Form 8606 Nondeductible IRAs (see figure) [Strikethrough this text: when you file your tax return] [Add: …for the year of the contribution.] It is your responsibility to keep track of the basis (the amount of non-deductible contributions) in your traditional IRA [Add something like: …by maintaining Form 8606 records. An 8606 is filed only for years when a non-deductible contribution is made. Thus, the most-recently filed version of the 8606 will show the total basis. In the first year that a distribution is taken from an IRA, a copy of this 8606 will be needed to properly prepare the tax return and start the process of “using up” the non-deductible contributions.]

This version is just offered as a suggestion… YMMV!
Map out your future – but do it in pencil. – Jon Bon Jovi

michaelingp
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Re: Haven't filed my Nondeductible IRA form 8606

Post by michaelingp » Sat Jun 01, 2019 9:56 am

All these years I've been keeping a spreadsheet detailing all my NDA's, only to find that last year, the first time I withdrew money, TurboTax had been keeping track of them and did everything automatically.

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