Finally filing 2018 taxes and Form 8606 is confusing

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Topic Author
KATNYC
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Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

We are so late getting our taxes done, closing two businesses (form 1065's) and a schedule C business plus personal taxes on 1040. The CPA we were using flaked (said he had accepted too much work), but we got a new recommendation; however, I am concerned because this CPA (an enrolled agent) says we do not need to file form 8606. The form 5498 reads that we do need to file 8606. Thankfully, we will only have Form 1040 and the Schedule C business for 2019 so we can do the taxes on our own.

We did a conversion in 2018 for 2017 traditional IRA contributions to a 2018 ROTH.
We received IRS Form 5498 from Vanguard and Form 1099-R from Vanguard.
Form 5498 Box 3 = 6,303.09 1099R Box 2a = 6,303.09
Form 5498 Box 3 = 6,624.01 1099R Box 2a = 6,624.01
We also made max 2018 contributions to our ROTH accounts
We also maxed out a 401K in 2018

Do we really not need to file 8606 forms?
Last edited by KATNYC on Tue Jul 02, 2019 9:10 am, edited 2 times in total.
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

KATNYC wrote: Tue Jul 02, 2019 8:20 am We are so late getting our taxes done, closing two businesses (form 1065's) and a schedule C business plus personal taxes on 1040. The CPA we were using flaked (said he had accepted too much work), but we got a new recommendation; however, I am concerned because this CPA says we do not need to file form 8606. The form 5498 reads that we do need to file 8606. Thankfully, we will only have Form 1040 and the Schedule C business for 2019 so we can do the taxes on our own.

We did a conversion in 2018 for 2017 IRA contributions to a ROTH.
We received IRS Form 5498 from Vanguard and Form 1099-R from Vanguard.
Form 5498 Box 3 = 6,303.09 1099R Box 2a = 6,303.09
Form 5498 Box 3 = 6,624.01 1099R Box 2a = 6,624.01
We also made max 2018 contributions to our ROTH accounts
We also maxed out a 401K in 2018

Do we really not need to file 8606 forms?
Hun? If you made 2017 IRA contributions to a Roth IRA, why did you need to do a Roth conversion? Perhaps you mis-spoke?

Why do you think "The form 5498 reads that we do need to file 8606"?
Uniballer
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by Uniballer »

From About Form 8606 | Internal Revenue Service
Use Form 8606 to report:

Nondeductible contributions you made to traditional IRAs.
Distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs.
Conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs.
Distributions from Roth IRAs.
I think you need Form 8606 because of your Roth conversion, unless you meant something else.
kaneohe
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by kaneohe »

KATNYC wrote: Tue Jul 02, 2019 8:20 am .........................................

We did a conversion in 2018 for 2017 IRA contributions to a ROTH.
We received IRS Form 5498 from Vanguard and Form 1099-R from Vanguard.
Form 5498 Box 3 = 6,303.09 1099R Box 2a = 6,303.09
Form 5498 Box 3 = 6,624.01 1099R Box 2a = 6,624.01
......................................
Do we really not need to file 8606 forms?
I think the 8606 is to report the Roth conversion in 2018.
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

kaneohe wrote: Tue Jul 02, 2019 8:58 am

I think the 8606 is to report the Roth conversion in 2018.
Yes, this is my thought as well, we need to file 8606 because of the ROTH conversion.
I'm not sure why the CPA is saying we do not need to file it.
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Tue Jul 02, 2019 8:50 am
Hun? If you made 2017 IRA contributions to a Roth IRA, why did you need to do a Roth conversion? Perhaps you mis-spoke?

Why do you think "The form 5498 reads that we do need to file 8606"?
In the text of form 5498 it reads to use form 8606 to calculate the tax.
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

Uniballer wrote: Tue Jul 02, 2019 8:53 am From About Form 8606 | Internal Revenue Service
Use Form 8606 to report:

Nondeductible contributions you made to traditional IRAs.
Distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs.
Conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs.
Distributions from Roth IRAs.
I think you need Form 8606 because of your Roth conversion, unless you meant something else.
Yes, this is my thinking as well, we have to file 8606
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

KatNYC, what did you convert?
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

KATNYC wrote: Tue Jul 02, 2019 8:20 am
We did a conversion in 2018 for 2017 traditional IRA contributions to a 2018 ROTH.
Ok. See this change now.

I think what you are trying to say is that you converted two separate traditional IRAs to Roth IRAs. Is that correct?
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

Do you have the two separate Forms 8606 from 2017 that document your (non-deductible?) contributions to two separate tIRAs?
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Tue Jul 02, 2019 9:08 am KatNYC, what did you convert?
We converted 2 separate traditional IRA's opened in 2017 to 2 separate ROTH IRA's in 2018
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Tue Jul 02, 2019 9:11 am
KATNYC wrote: Tue Jul 02, 2019 8:20 am
We did a conversion in 2018 for 2017 traditional IRA contributions to a 2018 ROTH.
Ok. See this change now.

I think what you are trying to say is that you converted two separate traditional IRAs to Roth IRAs. Is that correct?
Yes, yes, that is correct.
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Tue Jul 02, 2019 9:12 am Do you have the two separate Forms 8606 from 2017 that document your (non-deductible?) contributions to two separate tIRAs?
There is 1 form 8606 filed in 2017.
The CPA who flaked did send draft 2018 taxes (never billed since he didn't finish) and he also added 1 form 8606 showing the basis for the traditional IRA. It is not clear to me why this new CPA is telling me I don't need to file 8606.
Last edited by KATNYC on Tue Jul 02, 2019 10:26 am, edited 1 time in total.
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

KATNYC wrote: Tue Jul 02, 2019 10:13 am
retiredjg wrote: Tue Jul 02, 2019 9:12 am Do you have the two separate Forms 8606 from 2017 that document your (non-deductible?) contributions to two separate tIRAs?
There is just 1 form 8606 filed in 2017.
Well, that's wrong if you contributed to two different IRAs in 2017. Did you put both on 1 form?

You can download the forms for 2017 and do them over and send that in to the IRS.

And yes, you do need to do Form 8606 (two of them) for your 2018 conversions. If your CPA doesn't understand that, it is because you have two different 1099's showing conversion income. In order not to pay tax on that, you have to show (on 8606) that the conversion income was non-taxable because of the 2017 non-deductible contributions. That's probably the part the CPA is not understanding.

Did you do any non-deductible contributions in 2018?
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Tue Jul 02, 2019 10:24 am
KATNYC wrote: Tue Jul 02, 2019 10:13 am
retiredjg wrote: Tue Jul 02, 2019 9:12 am Do you have the two separate Forms 8606 from 2017 that document your (non-deductible?) contributions to two separate tIRAs?
There is just 1 form 8606 filed in 2017.
Well, that's wrong if you contributed to two different IRAs in 2017. Did you put both on 1 form?

You can download the forms for 2017 and do them over and send that in to the IRS.

And yes, you do need to do Form 8606 (two of them) for your 2018 conversions. If your CPA doesn't understand that, it is because you have two different 1099's showing conversion income. In order not to pay tax on that, you have to show (on 8606) that the conversion income was non-taxable because of the 2017 non-deductible contributions. That's probably the part the CPA is not understanding.

Did you do any non-deductible contributions in 2018?
I pulled the 2017 taxes and although we contributed to two IRA's in 2017 there is just one 8606. I recall discussing it with the CPA at the time but am not sure if both are on one form.

Yes, we also made non-deductible 2018 contributions.

I recall opening the tIRAs in 2016 because we owed the Fed. Instead of paying them, we opened tIRA's that April to reduce our taxable income.
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

KATNYC wrote: Tue Jul 02, 2019 10:35 am I pulled the 2017 taxes and although we contributed to two IRA's in 2017 there is just one 8606. I recall discussing it with the CPA at the time but am not sure if both are on one form.
What are the numbers on line 1, 2, 3, and 14?
Yes, we also made non-deductible 2018 contributions.
You will need to do two 8606 forms (Part 1) for your 2018 taxes - to document these two contributions. Since the conversions were also in 2018, those same forms will need Part II filled out to document the conversions.
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Tue Jul 02, 2019 10:42 am
KATNYC wrote: Tue Jul 02, 2019 10:35 am I pulled the 2017 taxes and although we contributed to two IRA's in 2017 there is just one 8606. I recall discussing it with the CPA at the time but am not sure if both are on one form.
What are the numbers on line 1, 2, 3, and 14?
Yes, we also made non-deductible 2018 contributions.
You will need to do two 8606 forms (Part 1) for your 2018 taxes - to document these two contributions. Since the conversions were also in 2018, those same forms will need Part II filled out to document the conversions.
The 2017 form 8606 reads:
Line 1 = 0
Line 2 = 1630
Line 3 = 1630
Line 14 = 1630

Found an email:
Since you are covered by a retirement plan from your job, your maximum deductible contribution would be $3,870 and you can put the remainder into an IRA for your spouse of $1,630. You can still contribute the maximum of $5,500 for your spouse not covered by a retirement plan at work which would total $9,370 in deductible IRA contributions.
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Tue Jul 02, 2019 10:42 am
KATNYC wrote: Tue Jul 02, 2019 10:35 am I pulled the 2017 taxes and although we contributed to two IRA's in 2017 there is just one 8606. I recall discussing it with the CPA at the time but am not sure if both are on one form.
What are the numbers on line 1, 2, 3, and 14?
Yes, we also made non-deductible 2018 contributions.
You will need to do two 8606 forms (Part 1) for your 2018 taxes - to document these two contributions. Since the conversions were also in 2018, those same forms will need Part II filled out to document the conversions.

I had a call scheduled with the CPA this afternoon but it was canceled. He did reply to my email about needing the two 8606 forms stating:

2—Early distribution, exception applies. Use Code 2 only if the participant has not reached age 591/2and you know the distribution is the following.
A Roth IRA conversion (an IRA converted to a Roth IRA)

I did not realize that the tax reform bill removed the ability to recharacterize any Roth IRA conversions done in 2018 and onward.
kaneohe
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by kaneohe »

KATNYC wrote: Tue Jul 02, 2019 12:24 pm
retiredjg wrote: Tue Jul 02, 2019 10:42 am
KATNYC wrote: Tue Jul 02, 2019 10:35 am I pulled the 2017 taxes and although we contributed to two IRA's in 2017 there is just one 8606. I recall discussing it with the CPA at the time but am not sure if both are on one form.
What are the numbers on line 1, 2, 3, and 14?
Yes, we also made non-deductible 2018 contributions.
You will need to do two 8606 forms (Part 1) for your 2018 taxes - to document these two contributions. Since the conversions were also in 2018, those same forms will need Part II filled out to document the conversions.

I had a call scheduled with the CPA this afternoon but it was canceled. He did reply to my email about needing the two 8606 forms stating:

2—Early distribution, exception applies. Use Code 2 only if the participant has not reached age 591/2and you know the distribution is the following.
A Roth IRA conversion (an IRA converted to a Roth IRA)

I did not realize that the tax reform bill removed the ability to recharacterize any Roth IRA conversions done in 2018 and onward.
I am puzzled by this note about early distribution and its' connection w/ the two 8606 forms. It seems more relevant to Box 7 code on the
1099-R which normally would be 1 = early distribution, no known exception, but could be 2 = early distribution, exception applies and I don't see how it relates to the 8606.

Having 1 8606 for 2017 sounds right since only one contribution had non-deductible component. The other was fully deductible so did
not need the 8606 to document that. Also no conversions were done in 2017 so again no need for the 8606.

However in 2018, it sounds like you did two conversions so the 8606 would be needed to document that for each person.
The 8606 would also be used to document non-deductible contributions but even if not needed for that, you would need it for the conversion.
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

kaneohe wrote: Tue Jul 02, 2019 3:17 pm
KATNYC wrote: Tue Jul 02, 2019 12:24 pm
retiredjg wrote: Tue Jul 02, 2019 10:42 am
KATNYC wrote: Tue Jul 02, 2019 10:35 am I pulled the 2017 taxes and although we contributed to two IRA's in 2017 there is just one 8606. I recall discussing it with the CPA at the time but am not sure if both are on one form.
What are the numbers on line 1, 2, 3, and 14?
Yes, we also made non-deductible 2018 contributions.
You will need to do two 8606 forms (Part 1) for your 2018 taxes - to document these two contributions. Since the conversions were also in 2018, those same forms will need Part II filled out to document the conversions.

I had a call scheduled with the CPA this afternoon but it was canceled. He did reply to my email about needing the two 8606 forms stating:

2—Early distribution, exception applies. Use Code 2 only if the participant has not reached age 591/2and you know the distribution is the following.
A Roth IRA conversion (an IRA converted to a Roth IRA)

I did not realize that the tax reform bill removed the ability to recharacterize any Roth IRA conversions done in 2018 and onward.
I am puzzled by this note about early distribution and its' connection w/ the two 8606 forms. It seems more relevant to Box 7 code on the
1099-R which normally would be 1 = early distribution, no known exception, but could be 2 = early distribution, exception applies and I don't see how it relates to the 8606.

Having 1 8606 for 2017 sounds right since only one contribution had non-deductible component. The other was fully deductible so did
not need the 8606 to document that. Also no conversions were done in 2017 so again no need for the 8606.

However in 2018, it sounds like you did two conversions so the 8606 would be needed to document that for each person.
The 8606 would also be used to document non-deductible contributions but even if not needed for that, you would need it for the conversion.
That was my thinking as well. I am going to bring this up when the call is rescheduled.
Last edited by KATNYC on Tue Jul 02, 2019 3:41 pm, edited 1 time in total.
kaneohe
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by kaneohe »

KATNYC wrote: Tue Jul 02, 2019 3:20 pm
kaneohe wrote: Tue Jul 02, 2019 3:17 pm
KATNYC wrote: Tue Jul 02, 2019 12:24 pm
retiredjg wrote: Tue Jul 02, 2019 10:42 am
KATNYC wrote: Tue Jul 02, 2019 10:35 am I pulled the 2017 taxes and although we contributed to two IRA's in 2017 there is just one 8606. I recall discussing it with the CPA at the time but am not sure if both are on one form.
What are the numbers on line 1, 2, 3, and 14?
Yes, we also made non-deductible 2018 contributions.
You will need to do two 8606 forms (Part 1) for your 2018 taxes - to document these two contributions. Since the conversions were also in 2018, those same forms will need Part II filled out to document the conversions.

I had a call scheduled with the CPA this afternoon but it was canceled. He did reply to my email about needing the two 8606 forms stating:

2—Early distribution, exception applies. Use Code 2 only if the participant has not reached age 591/2and you know the distribution is the following.
A Roth IRA conversion (an IRA converted to a Roth IRA)

I did not realize that the tax reform bill removed the ability to recharacterize any Roth IRA conversions done in 2018 and onward.
I am puzzled by this note about early distribution and its' connection w/ the two 8606 forms. It seems more relevant to Box 7 code on the
1099-R which normally would be 1 = early distribution, no known exception, but could be 2 = early distribution, exception applies and I don't see how it relates to the 8606.

Having 1 8606 for 2017 sounds right since only one contribution had non-deductible component. The other was fully deductible so did
not need the 8606 to document that. Also no conversions were done in 2017 so again no need for the 8606.

However in 2018, it sounds like you did two conversions so the 8606 would be needed to document that for each person.
The 8606 would also be used to document non-deductible contributions but even if not needed for that, you would need it for the conversion.
That was my thinking as well but CPA says 2017 was the last year ROTH conversions were allowed.
Apparently, I can still convert from ROTH to tIRA is I over contribute early in the year based on 2019 income.
Perhaps there was some misunderstanding. My impression is that there is no change in Roth conversions but
I believe (and even you stated) that recharacterizations of Roth conversions are no longer allowed.
Also recharacterizations of Roth contributions are still allowed. The 2 words begin w/ "c" and have many
letters in common but they are not the same.
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

KATNYC wrote: Tue Jul 02, 2019 10:35 am I recall opening the tIRAs in 2016 because we owed the Fed. Instead of paying them, we opened tIRA's that April to reduce our taxable income.
KatNYC, perhaps this was added as I was typing my answer. This information does not make sense in light of other things you have told us.

A non-deductible contribution to tIRA does not reduce your taxable income. It is possible that you made deductible contributions in 2016 and then made non-deductible contributions in 2017 and 2018, but if you have, your conversions are likely to be all messed up. We may need to go back several years to unravel this.
cherijoh
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by cherijoh »

KATNYC wrote: Tue Jul 02, 2019 11:09 am The 2017 form 8606 reads:
Line 1 = 0
Line 2 = 1630
Line 3 = 1630
Line 14 = 1630

Found an email:
Since you are covered by a retirement plan from your job, your maximum deductible contribution would be $3,870 and you can put the remainder into an IRA for your spouse of $1,630. You can still contribute the maximum of $5,500 for your spouse not covered by a retirement plan at work which would total $9,370 in deductible IRA contributions.
Here is what appears happened for 2017. You attempted to make 2 deductible contributions to IRAs for you and your spouse of $5500 each. The maximum allowable adjusted gross income (AGI) for making a deductible contribution to a tIRA is dependent on whether you have a workplace retirement plan. (In other words, your spouse has a higher AGI cap than you do for making deductible contributions; if neither of you had a workplace plan there would be no AGI cap). So since you have a workplace plan, you had made a deductible contribution of $3870 and a non-deductible contribution of $1630. Your spouse made a fully deductible contribution of $5500. Therefore, you needed to fill out a form 8606 in 2017 but your spouse did not - your old CPA correctly filed only one 8606 for 2017.

If you did a Roth conversion in 2018 on the non-deductible 2017 contributions, you need to fill out a different part of the Form 8606 to calculate the taxes owed on the conversions. So n 8606 is definitely required.

I'm still confused about your 2018 contributions. Did you both just go straight to Roth contributions? If so, form 8606 is not required to track those contributions, but YOU need one for the conversion.
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

KATNYC wrote: Tue Jul 02, 2019 11:09 am The 2017 form 8606 reads:
Line 1 = 0
Line 2 = 1630
Line 3 = 1630
Line 14 = 1630

Found an email:
Since you are covered by a retirement plan from your job, your maximum deductible contribution would be $3,870 and you can put the remainder into an IRA for your spouse of $1,630. You can still contribute the maximum of $5,500 for your spouse not covered by a retirement plan at work which would total $9,370 in deductible IRA contributions.
I believe this explains why there is only 1 Form 8606 for 2017. And it appears to be correct.

However, two things are still unclear. Where are the 2016 contributions and were they deductible or not? Where are the 2017 deductible contributions????
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

cherijoh wrote: Tue Jul 02, 2019 4:15 pm
KATNYC wrote: Tue Jul 02, 2019 11:09 am The 2017 form 8606 reads:
Line 1 = 0
Line 2 = 1630
Line 3 = 1630
Line 14 = 1630

Found an email:
Since you are covered by a retirement plan from your job, your maximum deductible contribution would be $3,870 and you can put the remainder into an IRA for your spouse of $1,630. You can still contribute the maximum of $5,500 for your spouse not covered by a retirement plan at work which would total $9,370 in deductible IRA contributions.
Here is what appears happened for 2017. You attempted to make 2 deductible contributions to IRAs for you and your spouse of $5500 each. The maximum allowable adjusted gross income (AGI) for making a deductible contribution to a tIRA is dependent on whether you have a workplace retirement plan. (In other words, your spouse has a higher AGI cap than you do for making deductible contributions; if neither of you had a workplace plan there would be no AGI cap). So since you have a workplace plan, you had made a deductible contribution of $3870 and a non-deductible contribution of $1630. Your spouse made a fully deductible contribution of $5500. Therefore, you needed to fill out a form 8606 in 2017 but your spouse did not - your old CPA correctly filed only one 8606 for 2017.

If you did a Roth conversion in 2018 on the non-deductible 2017 contributions, you need to fill out a different part of the Form 8606 to calculate the taxes owed on the conversions. So n 8606 is definitely required.

I'm still confused about your 2018 contributions. Did you both just go straight to Roth contributions? If so, form 8606 is not required to track those contributions, but YOU need one for the conversion.
Yes, this is what happened. We both made ROTH contributions in 2018 and we both did ROTH conversions in 2018.
Yes, I finally figured out that the 1 form 8606 is right for 2017.

The CPA who flaked actually did this part right. Glad that it's finally figured out...at least I think so.
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Tue Jul 02, 2019 4:18 pm
KATNYC wrote: Tue Jul 02, 2019 11:09 am The 2017 form 8606 reads:
Line 1 = 0
Line 2 = 1630
Line 3 = 1630
Line 14 = 1630

Found an email:
Since you are covered by a retirement plan from your job, your maximum deductible contribution would be $3,870 and you can put the remainder into an IRA for your spouse of $1,630. You can still contribute the maximum of $5,500 for your spouse not covered by a retirement plan at work which would total $9,370 in deductible IRA contributions.
I believe this explains why there is only 1 Form 8606 for 2017. And it appears to be correct.

However, two things are still unclear. Where are the 2016 contributions and were they deductible or not? Where are the 2017 deductible contributions????
The 2016 contributions were fully deductible. 2017 contributions were only partially deductible.
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

KATNYC wrote: Tue Jul 02, 2019 7:34 pm
retiredjg wrote: Tue Jul 02, 2019 4:18 pm
KATNYC wrote: Tue Jul 02, 2019 11:09 am The 2017 form 8606 reads:
Line 1 = 0
Line 2 = 1630
Line 3 = 1630
Line 14 = 1630

Found an email:
Since you are covered by a retirement plan from your job, your maximum deductible contribution would be $3,870 and you can put the remainder into an IRA for your spouse of $1,630. You can still contribute the maximum of $5,500 for your spouse not covered by a retirement plan at work which would total $9,370 in deductible IRA contributions.
I believe this explains why there is only 1 Form 8606 for 2017. And it appears to be correct.

However, two things are still unclear. Where are the 2016 contributions and were they deductible or not? Where are the 2017 deductible contributions????
The 2016 contributions were fully deductible. 2017 contributions were only partially deductible.
That is what I was thinking. Where is that money now?
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

In one post, you said you did non-deductible contributions to tIRA for 2018. In a different post, you said you contributed to Roth IRA in 2018. You cannot do both of these things.

It is possible you are just not being very precise in your language. Let's see if we can get this figured out. What did you actually do?
retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

Here is what I think you are telling us.

2016

Person 1 - $5,500 deductible contribution to tIRA
Person 2 - $5,500 deductible contribution to tIRA


2017

Person 1 - $3,870 deductible contribution to tIRA and $1,630 non-deductible contribution to tIRA (form 8606 done correctly)
Person 2 - $5,500 deductible contribution to tIRA


2018 is where it becomes unclear. It appears that both of these IRAs got converted to Roth. I assume you converted the whole IRAs.

Person 1 has $1,630 basis and that conversion will require a Form 8606 to avoid paying tax on that $1,630 a second time. The rest of that conversion is completely taxable.

Person 2 has $0 basis and that entire conversion will be taxable and (edited) this also requires Form 8606 (although I think some tax-preparers skip that step).


As for your taxes, ignore the 5498 forms because they are not tax forms. The 1099's report what might be taxable.
  • 1099R Box 2a = 6,303.09
    1099R Box 2a = 6,624.01
Can you clarify which of these belong to Person 1 and Person 2? Unfortunately, neither seem to correlate well with converting the entire tIRAs to Roth IRAs. So I'm thinking you might still have some tiRAs sitting around unconverted. This would be critical because it changes your entire form 8606 for Person 1 and you cannot finish your 2018 without getting this straight.



There is still the problem of your 2018 contributions. In one post you said you did non-deductible contributions to tIRA for 2018. In a different post, you said you contributed to Roth IRAs in 2018. You cannot do both of these. Exactly what did you do?

Also, we do not know if your 2018 contributions were made before the conversion or after the conversion. Or if you might have done several conversions. That might matter a lot.

The question of IRA contributions for 2019 comes up. Might as well get that straight now as well.
Last edited by retiredjg on Wed Jul 03, 2019 9:02 am, edited 1 time in total.
kaneohe
Posts: 6735
Joined: Mon Sep 22, 2008 12:38 pm

Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by kaneohe »

retiredjg wrote: Wed Jul 03, 2019 7:41 am ............................................................

Person 2 has $0 basis and that entire conversion will be taxable (and does not require a Form 8606).


...................................................
Doesn't the conversion require F8606 even w/o any basis?

"Form 8606 (2018) Page 2
Part II 2018 Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs
Complete this part if you converted part or all of your traditional, SEP, and SIMPLE IRAs to a Roth IRA in 2018."
retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

kaneohe wrote: Wed Jul 03, 2019 8:45 am
retiredjg wrote: Wed Jul 03, 2019 7:41 am ............................................................

Person 2 has $0 basis and that entire conversion will be taxable (and does not require a Form 8606).


...................................................
Doesn't the conversion require F8606 even w/o any basis?

"Form 8606 (2018) Page 2
Part II 2018 Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs
Complete this part if you converted part or all of your traditional, SEP, and SIMPLE IRAs to a Roth IRA in 2018."
You know, that is probably right. :oops: There is no 8606 generated for my conversions, but I'm over 59.5. Thanks. I'll fix it.
kaneohe
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Joined: Mon Sep 22, 2008 12:38 pm

Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by kaneohe »

retiredjg wrote: Wed Jul 03, 2019 9:00 am
kaneohe wrote: Wed Jul 03, 2019 8:45 am
retiredjg wrote: Wed Jul 03, 2019 7:41 am ............................................................

Person 2 has $0 basis and that entire conversion will be taxable (and does not require a Form 8606).


...................................................
Doesn't the conversion require F8606 even w/o any basis?

"Form 8606 (2018) Page 2
Part II 2018 Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs
Complete this part if you converted part or all of your traditional, SEP, and SIMPLE IRAs to a Roth IRA in 2018."
You know, that is probably right. :oops: There is no 8606 generated for my conversions, but I'm over 59.5. Thanks. I'll fix it.
why would age affect whether the 8606 is generated? I'm not aware of an age exclusion for conversion reporting.
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

kaneohe wrote: Wed Jul 03, 2019 9:12 am why would age affect whether the 8606 is generated? I'm not aware of an age exclusion for conversion reporting.
I'll pm you rather than distract from the thread.
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Wed Jul 03, 2019 7:41 am Here is what I think you are telling us.

2016

Person 1 - $5,500 deductible contribution to tIRA
Person 2 - $5,500 deductible contribution to tIRA


2017

Person 1 - $3,870 deductible contribution to tIRA and $1,630 non-deductible contribution to tIRA (form 8606 done correctly)
Person 2 - $5,500 deductible contribution to tIRA


2018 is where it becomes unclear. It appears that both of these IRAs got converted to Roth. I assume you converted the whole IRAs.

Person 1 has $1,630 basis and that conversion will require a Form 8606 to avoid paying tax on that $1,630 a second time. The rest of that conversion is completely taxable.

Person 2 has $0 basis and that entire conversion will be taxable and (edited) this also requires Form 8606 (although I think some tax-preparers skip that step).


As for your taxes, ignore the 5498 forms because they are not tax forms. The 1099's report what might be taxable.
  • 1099R Box 2a = 6,303.09
    1099R Box 2a = 6,624.01
Can you clarify which of these belong to Person 1 and Person 2? Unfortunately, neither seem to correlate well with converting the entire tIRAs to Roth IRAs. So I'm thinking you might still have some tiRAs sitting around unconverted. This would be critical because it changes your entire form 8606 for Person 1 and you cannot finish your 2018 without getting this straight.



There is still the problem of your 2018 contributions. In one post you said you did non-deductible contributions to tIRA for 2018. In a different post, you said you contributed to Roth IRAs in 2018. You cannot do both of these. Exactly what did you do?

Also, we do not know if your 2018 contributions were made before the conversion or after the conversion. Or if you might have done several conversions. That might matter a lot.

The question of IRA contributions for 2019 comes up. Might as well get that straight now as well.
The CPA finally gets it. I wrote all out all the backstory from 2016 until now. We have a call scheduled to go over everything this coming week.

We converted from tIRA to ROTH January 16, 2018 and made 2017 ROTH contributions January 25, 2018.
We made 2018 ROTH contributions in April 2019.

The $1630 is the non-deductible contribution that was converted in January 2018.

2016
Person 1 - $5,500 deductible contribution to tIRA
Person 2 - $5,500 deductible contribution to tIRA


2017
Person 1 - $3,870 deductible contribution to tIRA and $1,630 non-deductible contribution to tIRA (form 8606 done correctly)
Person 2 - $5,500 deductible contribution to tIRA

2018
Person 1 - $5,500 contribution to ROTH
Person 2 - $5,500 contribution to ROTH

Person 1 has $1,630 basis and that conversion will require a Form 8606 to avoid paying tax on that $1,630 a second time. The rest of that conversion is completely taxable.

Person 2 has $0 basis and that entire conversion will be taxable and (edited) this also requires Form 8606 (although I think some tax-preparers skip that step).

2018
Person 1 - 1099R Box 2a = 6,303.09
Person 2 - 1099R Box 2a = 6,624.01
Topic Author
KATNYC
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

It turns out the 2017 CPA completed the 8606 incorrectly as taking a distribution from a ROTH, but we never had a ROTH in 2017.
He completed part III for the 2017 form 8606. It's all being fixed now.
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

KATNYC wrote: Sat Jul 06, 2019 4:16 pm The CPA finally gets it. I wrote all out all the backstory from 2016 until now. We have a call scheduled to go over everything this coming week.
OK, but from my reading of what you have told us, it still seems this is not worked out. Let's try this again.


We converted from tIRA to ROTH January 16, 2018....
You converted what (exactly) on January 16, 2018?

If you just converted Person 1's basis, you still have to pro-rate that with the rest of Person 1's IRA. This has to be done on the 2018 taxes. If you converted all of Person 1's IRA, I would expect the number would not look like $6,303.09.

Did you also convert Person 2's IRA to Roth?


2018
Person 1 - 1099R Box 2a = 6,303.09
Person 2 - 1099R Box 2a = 6,624.01
I cannot figure out any way these numbers fit in with what you have told us about what was contributed or what you have converted.

Maybe you have this all figured out already, but that is not apparent from what you have told us.
Topic Author
KATNYC
Posts: 490
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

retiredjg wrote: Tue Jul 09, 2019 3:01 pm
KATNYC wrote: Sat Jul 06, 2019 4:16 pm The CPA finally gets it. I wrote all out all the backstory from 2016 until now. We have a call scheduled to go over everything this coming week.
OK, but from my reading of what you have told us, it still seems this is not worked out. Let's try this again.


We converted from tIRA to ROTH January 16, 2018....
You converted what (exactly) on January 16, 2018?

If you just converted Person 1's basis, you still have to pro-rate that with the rest of Person 1's IRA. This has to be done on the 2018 taxes. If you converted all of Person 1's IRA, I would expect the number would not look like $6,303.09.

Did you also convert Person 2's IRA to Roth?


2018
Person 1 - 1099R Box 2a = 6,303.09
Person 2 - 1099R Box 2a = 6,624.01
I cannot figure out any way these numbers fit in with what you have told us about what was contributed or what you have converted.

Maybe you have this all figured out already, but that is not apparent from what you have told us.
We received the new drafts which now have two 8606 forms completed.
Person 1: Taxable amount is $4,730 for tIRA conversion to ROTH on January 16, 2018
Person 2: Taxable amount is $6,624 for tIRA conversion to ROTH on January 16, 2018
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

Does that seem right to you?

For example, Person 2 made $11k total in deductible contributions to tIRA for 2016 and 2017. If all of this was converted to Roth in January 2018, the taxable amount should be at least $11k, but that is not what was reported on the 1099. So what happened?

Either your investment took a huge dive (in which case you may have basis left over) or you didn't convert all of the IRA to Roth IRA. If you didn't convert all of the IRA to Roth IRA, I think the 8606 is probably wrong because the rest of the IRA has to be pro-rated in order to determine the true taxable amount of the conversion.

That's why I asked exactly what did you convert? We still don't know the answer to that.

It is possible that I am just misunderstanding your situation and you may have it all figured out and you might have it right. However, I'm skeptical and have asked questions to try to either support or not support what you are coming up with. But when you don't answer direct questions, it is impossible to either say "yes, you've got it right" or "no, you don't have it right".

I hope it does not seem like I'm harassing you, but if you post something it appears you are expecting a confirmation or comment in return. Otherwise, I'd just let it drop.
Topic Author
KATNYC
Posts: 490
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by KATNYC »

Just an update. The taxes were finally filed and all the penalties for filing late were abated by the CPA.
retiredjg
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Re: Finally filing 2018 taxes and Form 8606 is confusing

Post by retiredjg »

Glad to hear it worked out.
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