form 8606 blues

[Ani]

Hello All.

I was educating myself regarding IRA contributions- and learnt about the form 8606- needed for reporting non -deductible IRA contributions to IRS.
me/wife had had 401ks all these years and exceed the income limit for deductible IRA contribution.


I went back through my tax returns all the way back till 2015 and realized that the form 8606 was never filed all these years.

Over these years- I had 4 CPA's and not a single one of them filed this form. Before filing tax returns- I gave them all the forms they requested from me and also told them about my 401k and IRA contributions.

Without these forms - the IRS wont know my basis in IRA and I will be double taxed on this amount when I take the money out in retirement.

Has this been the experience of other people on this forum as well with the 8606 form.

Is filing 8606 just too much work for CPAs? or are my CPAs here in NJ just lazy/careless. Some of them didn't come cheap either- charged 1000$ for a simple tax return.

Thank you.

AK

[tibbitts]

Hello All.

I was educating myself regarding IRA contributions- and learnt about the form 8606- needed for reporting non -deductible IRA contributions to IRS.
me/wife had had 401ks all these years and exceed the income limit for deductible IRA contribution.


I went back through my tax returns all the way back till 2015 and realized that the form 8606 was never filed all these years.

Over these years- I had 4 CPA's and not a single one of them filed this form. Before filing tax returns- I gave them all the forms they requested from me and also told them about my 401k and IRA contributions.

Without these forms - the IRS wont know my basis in IRA and I will be double taxed on this amount when I take the money out in retirement.

Has this been the experience of other people on this forum as well with the 8606 form.

Is filing 8606 just too much work for CPAs? or are my CPAs here in NJ just lazy/careless. Some of them didn't come cheap either- charged 1000$ for a simple tax return.

Thank you.

AK

Whenever I've posted on the forum about the curse of the 8606, Bogleheads tell me I'm crazy, and that it's completely trivial. And then we get posts like this one all the time, probably more than about any other IRS form. Well, it is a curse, and unless you have very special circumstances (employer plans accepting rollovers, etc.) you'll regret having contributed to a deductible IRA for the rest of your life. And as a bonus, the curse will live on even after you're gone.

[BruinBones]

I'm not a CPA, but I have read and heard of many CPAs not well-versed in non-deductible IRA, back door Roth IRA, and Form 8606.
Fortunately, sites like Bogleheads can educate you.
Further, you may send in past non-filed 8606 forms (you can find a copy of each year's on the IRS.gov site and other internet sites).
Fill them out sequentially so that your cumulative basis stays correct.
Send them all together with a brief cover letter explaining that you were incorrectly advised by your CPA to not include them with your previous returns.
Sent by certified mail receipt to the nearest IRS center for your region that you would have sent a hardcopy of your tax return.
Don't expect a personal reply from the IRS.

[FiveK]

I went back through my tax returns all the way back till 2015 and realized that the form 8606 was never filed all these years.

Prior Year Forms 8606 may be useful.

See also Backdoor Roth - Bogleheads for some examples, and the 'Form8606' tab of the personal finance toolbox. The latter can provide a quick double check for how your 2015 through 2019 forms should look.

[Ani]

[/quote]
Whenever I've posted on the forum about the curse of the 8606, Bogleheads tell me I'm crazy, and that it's completely trivial. And then we get posts like this one all the time, probably more than about any other IRS form. Well, it is a curse, and unless you have very special circumstances (employer plans accepting rollovers, etc.) you'll regret having contributed to a deductible IRA for the rest of your life. And as a bonus, the curse will live on even after you're gone.
[/quote]


Sorry did you mean- regret having contributed to a 'non deductible' IRA.
It does feel like a curse- I am probably better just contributing to a taxable account.



It almost feels like a scam by IRS to double tax the money -
the CPA doesnt tell you.
the brokerage doesnt tell you.
My work is in no way related to finance/taxation. I only learnt about this form after spending a lot of time educating myself regarding backdoor roth ira conversions.
Many people must be getting double taxed without realizing it.

[Ani]

I'm not a CPA, but I have read and heard of many CPAs not well-versed in non-deductible IRA, back door Roth IRA, and Form 8606.
Fortunately, sites like Bogleheads can educate you.
Further, you may send in past non-filed 8606 forms (you can find a copy of each year's on the IRS.gov site and other internet sites).
Fill them out sequentially so that your cumulative basis stays correct.
Send them all together with a brief cover letter explaining that you were incorrectly advised by your CPA to not include them with your previous returns.
Sent by certified mail receipt to the nearest IRS center for your region that you would have sent a hardcopy of your tax return.
Don't expect a personal reply from the IRS.

Thank you.
I guess I dont have to amend the returns- as these contributions were never deducted from my income on any of the 1040s.

[Ani]

I went back through my tax returns all the way back till 2015 and realized that the form 8606 was never filed all these years.

Prior Year Forms 8606 may be useful.

See also Backdoor Roth - Bogleheads for some examples, and the 'Form8606' tab of the personal finance toolbox. The latter can provide a quick double check for how your 2015 through 2019 forms should look.

Thank you. These are helpful links

[MP123]

You can file 8606 for the missing years without amending each return, it can be filed separately. Then you'll at least have a record of the basis you apparently have in the IRA and decide where to go from there.

[BruinBones]

I guess I dont have to amend the returns- as these contributions were never deducted from my income on any of the 1040s.

Correct. No amended returns needed. Just send corrected 8606 forms with explanation letter.

[Olemiss540]

Hello All.

I was educating myself regarding IRA contributions- and learnt about the form 8606- needed for reporting non -deductible IRA contributions to IRS.
me/wife had had 401ks all these years and exceed the income limit for deductible IRA contribution.


I went back through my tax returns all the way back till 2015 and realized that the form 8606 was never filed all these years.

Over these years- I had 4 CPA's and not a single one of them filed this form. Before filing tax returns- I gave them all the forms they requested from me and also told them about my 401k and IRA contributions.

Without these forms - the IRS wont know my basis in IRA and I will be double taxed on this amount when I take the money out in retirement.

Has this been the experience of other people on this forum as well with the 8606 form.

Is filing 8606 just too much work for CPAs? or are my CPAs here in NJ just lazy/careless. Some of them didn't come cheap either- charged 1000$ for a simple tax return.

Thank you.

AK

Whenever I've posted on the forum about the curse of the 8606, Bogleheads tell me I'm crazy, and that it's completely trivial. And then we get posts like this one all the time, probably more than about any other IRS form. Well, it is a curse, and unless you have very special circumstances (employer plans accepting rollovers, etc.) you'll regret having contributed to a deductible IRA for the rest of your life. And as a bonus, the curse will live on even after you're gone.

It is trivial. Just because an oil change is trivial work doesnt mean someone cant forget to refill the oil pan.....

[Ani]

It is trivial. Just because an oil change is trivial work doesn't mean someone cant forget to refill the oil pan.....
[/quote]


Sorry, but being taxed on the same money in future , that I've already been taxed now-- doesn't sound trivial to me.

[tibbitts]

Hello All.

I was educating myself regarding IRA contributions- and learnt about the form 8606- needed for reporting non -deductible IRA contributions to IRS.
me/wife had had 401ks all these years and exceed the income limit for deductible IRA contribution.


I went back through my tax returns all the way back till 2015 and realized that the form 8606 was never filed all these years.

Over these years- I had 4 CPA's and not a single one of them filed this form. Before filing tax returns- I gave them all the forms they requested from me and also told them about my 401k and IRA contributions.

Without these forms - the IRS wont know my basis in IRA and I will be double taxed on this amount when I take the money out in retirement.

Has this been the experience of other people on this forum as well with the 8606 form.

Is filing 8606 just too much work for CPAs? or are my CPAs here in NJ just lazy/careless. Some of them didn't come cheap either- charged 1000$ for a simple tax return.

Thank you.

AK

Whenever I've posted on the forum about the curse of the 8606, Bogleheads tell me I'm crazy, and that it's completely trivial. And then we get posts like this one all the time, probably more than about any other IRS form. Well, it is a curse, and unless you have very special circumstances (employer plans accepting rollovers, etc.) you'll regret having contributed to a deductible IRA for the rest of your life. And as a bonus, the curse will live on even after you're gone.

It is trivial. Just because an oil change is trivial work doesnt mean someone cant forget to refill the oil pan.....

Exactly. And it isn't just you that has to understand it. Eventually if you live long enough other people who have no idea what an 8606 is will have to deal with it. They'll have to understand what kind of IRAs it applies to. It even causes different tax programs to produce different results due to the vague "at least three decimal point" guideline. It's the gift that keeps on giving. Yet another thing to go wrong with such little benefit that it's absolutely not even close to worthwhile.

[FiveK]

It is trivial. Just because an oil change is trivial work doesn't mean someone cant forget to refill the oil pan.....

Sorry, but being taxed on the same money in future , that I've already been taxed now-- doesn't sound trivial to me.

Perhaps Olemiss540 was referring to the amount of effort it takes to do form 8606.

Yes, the CPAs should have done it - it would have been trivial for them to do.

At this point, it may be less effort for you to do all of them than to haggle with the CPAs about it.

[corn18]

I had to catch up on 3 years of 8606's. I found a CPA that knew what I was talking about and had them do my taxes that year. Took a little bit of extra paperwork from me, but they knew what they were doing and got it all squared away. Haven't used a CPA since because the 8606 is fairly simple if you know how to make turbotax work. Which is not obvious.

I also keep very careful track of all my basis and gains by year in a spreadsheet. I don't think I will need to get to my Roth money (which all comes from backdoor) before age 59.5, but if I do, I have a detailed accounting of all the basis and gains by year and should be able to supplement any 8606 that I may have screwed up.




Between that data and the below ordering info, I am finally comfortable with how to handle a Roth account.

ORDER OF DISTRIBUTIONS
Regular contributions
Taxable portion of first conversion
Nontaxable portion of first conversion
Each subsequent conversion, in order, with the taxable portion coming out first for each conversion
Earnings (any increase in value occurring inside the Roth IRA)

TAXES AND PENALTIES

UNDER AGE 59.5 
FIVE YEAR CONVERSION HOLDING PERIOD NOT MET 
Contributions: Tax-No; Penalty-No 
Conversions: Tax-No; Penalty-Yes (Taxable Portion) 
Conversions: Tax-No ;Penalty-No (Nontaxable Portion) 
Earnings: Tax-Yes; Penalty-Yes 

UNDER AGE 59.5 
FIVE YEAR CONVERSION HOLDING PERIOD MET 
Contributions: Tax-No; Penalty-No 
Conversions: Tax-No; Penalty-No (Taxable Portion) 
Conversions: Tax-No; Penalty-No (Nontaxable Portion) 
Earnings: Tax-Yes; Penalty-Yes 

OVER AGE 59.5 
LESS THAN FIVE YEARS SINCE OPENING FIRST ROTH IRA 
Contributions: Tax-No ;Penalty-No 
Conversions: Tax-No; Penalty-No (Taxable Portion) 
Conversions: Tax-No; Penalty-No (Nontaxable Portion) 
Earnings: Tax-Yes; Penalty-No 

OVER AGE 59.5 
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA 
All Distributions Are Qualified 
No Taxes 
No Penalties 

[Olemiss540]

It is trivial. Just because an oil change is trivial work doesn't mean someone cant forget to refill the oil pan.....

Sorry, but being taxed on the same money in future , that I've already been taxed now-- doesn't sound trivial to me.

Perhaps Olemiss540 was referring to the amount of effort it takes to do form 8606.

Yes, the CPAs should have done it - it would have been trivial for them to do.

At this point, it may be less effort for you to do all of them than to haggle with the CPAs about it.

Precisely.

[kaneohe]

What did you do after you made the non-deductible contributions? If you just left them in the TIRA and didn't make any withdrawals/conversions, it should be trivial to do the 8606; just 4 lines. Start w/ the earliest yr first and then move to next yr.

[Katietsu]

I do not understand how this can happen so often when tax software is involved. Any CPA or tax preparer should be entering a traditional IRA contribution when doing the return. It needs reported somewhere and may lower taxes if deductible. Once entered the software should complete the Form 8606 with no input from the preparer. So, how does this get missed by multiple people for multiple years?

[sawdust60]

Some of the data for 8606 is supposed to come from Form 5498. 5498 is always issued late. 2018 was dated 5/20/2019, and I haven't seen the one for 2019.

For me, there is nothing on 8606 that I don't know on December 31, so I send it with my return (now that I know of the requirement). I did have a few prior years to file initially.

When I do my tax return, I also update a spreadsheet which summarizes each year's account changes.

[Ani]

Thank you all.

I wonder if ill be penalized per form per year for me/wife for filing late.

[kaneohe]

Thank you all.

I wonder if ill be penalized per form per year for me/wife for filing late.

there is a stated potential penalty but all the stories I've read said IRS has not imposed it historically.

[Ani]

Thank you all.

I wonder if ill be penalized per form per year for me/wife for filing late.

there is a stated potential penalty but all the stories I've read said IRS has not imposed it historically.

Thank you.

[jebmke]

I do not understand how this can happen so often when tax software is involved. Any CPA or tax preparer should be entering a traditional IRA contribution when doing the return. It needs reported somewhere and may lower taxes if deductible. Once entered the software should complete the Form 8606 with no input from the preparer. So, how does this get missed by multiple people for multiple years?

I agree. But I have had clients come into TaxAide who had used paid preparers before and their preparer had not done this. It may be that if they know the taxpayer isn't qualified (based on income) for the deduction they simply ignore the contribution and move along.

I always ask the client if they OR ANYONE ELSE had made contributions to an IRA on their behalf. I once had a client (new to me) who revealed that her mother had been funding her IRA for her for many years and nothing had been done (no deductions, no 8606).

[diy60]

So, how does this get missed by multiple people for multiple years?

I can tell you my sad story. For several years spouse and I naively contributed to TIRA using taxed dollars. I knew it wasn't deductible so I didn't bother entering the info into the software, hence no 8606 was ever generated. There was also a few years where we grabbed the wrong deposit slip and accidentally contributed to the IRA instead of Roth IRA (this is when we had accounts directly with the different mutual fund companies.) Dial forward a few years and we became better informed and sent in about 12 8606 forms. Dial forward a few more years and I have converted all of our TIRAs and fully accounted for the basis.

Not sure about other folks, but this is how it happened to me.

[WarAdmiral]

Following..

[lstone19]

I do not understand how this can happen so often when tax software is involved. Any CPA or tax preparer should be entering a traditional IRA contribution when doing the return. It needs reported somewhere and may lower taxes if deductible. Once entered the software should complete the Form 8606 with no input from the preparer. So, how does this get missed by multiple people for multiple years?

This. Follow the interview in TT and be accurate in your answers and it will generate the 8606. I suspect it gets missed because people think they know better so they skip around and since they know their IRA contribution isn't deductible, they just skip the whole IRA contribution section.

[Ani]

I wonder if these same CPAs file 8606 with their personal tax return-- for their own non deductible ira contributions

3 of my CPAS charged 200$ for taxes- they didnt file 8606


one of them charged 1000$ and called me every month to help me "manage my investments"-- he didnt file the 8606 either.
This CPA was in an upscale neighborhood in jersey- I cannot possibly be his only client who makes non-deductible contributions. He should know have known better.

Baffles me that all these CPAs missed filing the same form(especially when its not a very complex form). I have no logical explanation for this. Maybe its intentionally not stressed in CPA school curriculum to encourage double taxation by IRS.

Going forward- ill just stick with turbotax.

[lstone19]

Baffles me that all these CPAs missed filing the same form(especially when its not a very complex form). I have no logical explanation for this. Maybe its intentionally not stressed in CPA school curriculum to encourage double taxation by IRS.

CPA education (my wife is a CPA) and tax preparation education are two very different fields. It's why my wife leaves the tax returns to me. She knows corporate accounting, not personal taxes.

[retiredjg]

Some of the data for 8606 is supposed to come from Form 5498. 5498 is always issued late. 2018 was dated 5/20/2019, and I haven't seen the one for 2019.

For me, there is nothing on 8606 that I don't know on December 31, so I send it with my return (now that I know of the requirement). I did have a few prior years to file initially.

When I do my tax return, I also update a spreadsheet which summarizes each year's account changes.

I think you misunderstand the 5498 form. It is not late. It is no due until May. It is not part of your tax return, simply an informational form.

[Ani]

Baffles me that all these CPAs missed filing the same form(especially when its not a very complex form). I have no logical explanation for this. Maybe its intentionally not stressed in CPA school curriculum to encourage double taxation by IRS.

CPA education (my wife is a CPA) and tax preparation education are two very different fields. It's why my wife leaves the tax returns to me. She knows corporate accounting, not personal taxes.

This is interesting to know.

[retiredjg]

Ani, we've seen this over and over for years. Awhile back, people were reporting that their tax preparers didn't even ask about contributions to IRA. Happened to me once back about 1986 in fact, long before I knew any better either. Back even before tax software.

They just didn't know to ask. Or forgot to ask. Or asked and forgot to note it in the software. Or whatever. You didn't know either even though it was your responsibility as well.

Things change. Just get this fixed and move on.

[Chip]

I think you misunderstand the 5498 form. It is not late. It is no due until May. It is not part of your tax return, simply an informational form.

Agreed it's not due until May.

But I think part of the problem with 8606s not being prepared is that there is no piece of paper that prompts the preparer that an entry has to be made. The OP told the CPA that there was a contribution, but if that wasn't written down it would be easy to forget once the preparer finally got around to the return.

If the 5498s came out in January there'd probably be fewer missing 8606s. They wouldn't capture Jan-Apr contributions, but an amended 5498 could be issued then.

[HomeStretch]

Your CPAs missed the Form 8606s for whatever reason. As recommended above, prepare the missing forms yourself and send them in USPS certified mail so you have proof of filing. BTW a family member told me their tax preparer adds an additional fee for each non-usual form (like 8606) or schedule included in the return.

No one cares about your finances/investment/taxes as much as you do. So whenever you do something (like a backdoor Roth) for the first time, be sure to research it beforehand as it’s in your best interest to educate yourself.

[NYCPete]

Hello All.

I was educating myself regarding IRA contributions- and learnt about the form 8606- needed for reporting non -deductible IRA contributions to IRS.
me/wife had had 401ks all these years and exceed the income limit for deductible IRA contribution.


I went back through my tax returns all the way back till 2015 and realized that the form 8606 was never filed all these years.

Over these years- I had 4 CPA's and not a single one of them filed this form. Before filing tax returns- I gave them all the forms they requested from me and also told them about my 401k and IRA contributions.

Without these forms - the IRS wont know my basis in IRA and I will be double taxed on this amount when I take the money out in retirement.

Has this been the experience of other people on this forum as well with the 8606 form.

Is filing 8606 just too much work for CPAs? or are my CPAs here in NJ just lazy/careless. Some of them didn't come cheap either- charged 1000$ for a simple tax return.

Thank you.

AK

For your own informational benefit, I pay a CPA in NYC about $400 a year to do my taxes, and they've caught the 8606 issue and made sure it was filed. This CPA's firm has one fill out a fairly lengthy questionnaire that includes IRA contributions, which may have helped. I would be absolutely furious if I paid a CPA $1,000 and they didn't have an extensive list of questions they had for me about my financial and tax situation to catch stuff like non-deductible IRA contributions. Apparently, price doesn't always mean expertise.

If you ultimately fix the backlog of missing forms yourself, but don't want to do it moving forward, I do encourage you to be upfront with your CPA next tax season about doing it. If they're not familiar, then find someone else, or tell them that their continued business is predicated on doing it correctly moving forward. You might also look for a new CPA by approaching them this year and ask for a quote on filing the old 8606s. You'll get the headache done with, and probably found yourself the person who will do your taxes next year.

Best,
Peter

[MarkVH0518]

Let me suggest a forward look.
Depending on whether you have money to pay the additional taxes,
you should seriously consider performing Roth conversions with this money.
Now that you have a mix of non-deductible tIRA and earnings, the filing
of 8606 for Roth conversions will be complicated (but not impossible) and could be expensive.

But it could well be valuable down the road.

Also note, you cannot avoid the complicated part of 8606 forever.
Now that your tIRA has a tax basis you will need to deal with this 8606 complication,
so you should seriously consider dealing with it now. Could be of great financial value to you.

Hurry up and address the missing 8606 filings
and then spend the rest of 2020 investing whether and how to Roth convert.

Regards,
Mark

[HomeStretch]

What did you do after you made the non-deductible contributions? If you just left them in the TIRA and didn't make any withdrawals/conversions, it should be trivial to do the 8606; just 4 lines. Start w/ the earliest yr first and then move to next yr.

+1

OP, are your non-deductible IRA contributions still in a traditional IRA account (tIRA) or did you convert them to a Roth IRA (step 2 of the backdoor Roth)? If you haven’t converted at least your basis yet, go ahead and do so as the future growth in a Roth IRA will be tax free. A 2020 rollover will not impact your Form 8606 for 2019 or prior years.

If you also rollover the tIRA growth to the Roth IRA, it will be taxed (likely an insignificant amount) on Form 8606 in the year of the rollover. Go ahead and roll it over otherwise any future backdoor Roth will be subject to the pro rata rule.

If you Intend to leave the non-deductible IRA contributions in the tIRA, then yes it might better for you to contribute to a Taxable account than a tIRA.

[Ani]

Thank you all for your insights.

[2tall4economy]

I do not understand how this can happen so often when tax software is involved. Any CPA or tax preparer should be entering a traditional IRA contribution when doing the return. It needs reported somewhere and may lower taxes if deductible. Once entered the software should complete the Form 8606 with no input from the preparer. So, how does this get missed by multiple people for multiple years?

I’m a cpa, have filed my taxes except when I worked over seas using turbo tax, caught errors Kpmg made when they filed my overseas taxes, and even I had to do the 8606 four or five times and review the return before I selected the exact correct sequence of steps required in TurboTax to put the numbers in the right boxes.

I wish TurboTax was set up to allow you to manually enter data in forms and have it recalculate the other forms to fix things like this...

[McDougal]

Correct me if I am wrong please. I think you only need to file 8606 in the year(s) that you made non-deductible contributions to an IRA which results in co-mingled money. Not every year for the rest of your life. And also if you received a distribution or made a conversion. But if you are not making any non-ded. contributions, no form is needed, am I correct? Because if not, I have some prior years I need to complete 8606s for

[seawolf21]

It almost feels like a scam by IRS to double tax the money -
the CPA doesnt tell you.
the brokerage doesnt tell you.
My work is in no way related to finance/taxation. I only learnt about this form after spending a lot of time educating myself regarding backdoor roth ira conversions.
Many people must be getting double taxed without realizing it.

Stop blaming on someone else. Neither IRS or brokerage force you to do a non-deductible IRA contribution.

Brokerage doesn’t know deductibility of anybody’s IRA contribution so it not their place to tell anything.

CPAs are not necessarily tax preparers.

Baffles me that all these CPAs missed filing the same form(especially when its not a very complex form). I have no logical explanation for this. Maybe its intentionally not stressed in CPA school curriculum to encourage double taxation by IRS.

CPA education (my wife is a CPA) and tax preparation education are two very different fields. It's why my wife leaves the tax returns to me. She knows corporate accounting, not personal taxes.

+1

I’ve posted many times before. CPA is not necessarily a tax preparer. These are two different disciplines. It’s like asking a cardiologist to work on your teeth because both a cardiologist and a dentist can be addressed as Doctor.

[FiveK]

Correct me if I am wrong please. I think you only need to file 8606 in the year(s) that you made non-deductible contributions to an IRA which results in co-mingled money. Not every year for the rest of your life. And also if you received a distribution or made a conversion. But if you are not making any non-ded. contributions, no form is needed, am I correct? Because if not, I have some prior years I need to complete 8606s for

See Who Must File Form 8606. If you fit one or more of those conditions, you do. If not, you don't.

[sycamore]

...But if you are not making any non-ded. contributions, no form is needed, am I correct? ...

There are three parts to form 8606. Go to the source:

Part I Nondeductible Contributions to Traditional IRAs and Distributions From Traditional, SEP, and SIMPLE IRAs

Complete this part only if one or more of the following apply.
• You made nondeductible contributions to a traditional IRA for 2019.
• You took distributions from a traditional, SEP, or SIMPLE IRA in 2019 and you made nondeductible contributions to a
traditional IRA in 2019 or an earlier year. For this purpose, a distribution does not include a rollover (other than a
repayment of a qualified disaster distribution (see 2019 Forms 8915-C and 8915-D)), qualified charitable distribution,
one-time distribution to fund an HSA, conversion, recharacterization, or return of certain contributions.
• You converted part, but not all, of your traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2019 and you made
nondeductible contributions to a traditional IRA in 2019 or an earlier year.

Part II 2019 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 2019

Part III Distributions From Roth IRAs

Complete this part only if you took a distribution from a Roth IRA in 2019. For this purpose, a distribution does not include
a rollover (other than a repayment of a qualified disaster distribution (see 2019 Forms 8915-C and 8915-D)), qualified
charitable distribution, one-time distribution to fund an HSA, recharacterization, or return of certain contributions (see
instructions)

So you wouldn't need to fill in part I if making a deductible contribution to a Traditional IRA. But the other 2 parts might apply.

Edit: fixed url reference.

[MarkBarb]

Sounds like you found pitfall #1 in non-deductible contributions. Make sure that you don't fall into pitfall #2. That one is that there is no requirement to file an 8606 in subsequent years when you don't make non-deductible contributions. That sounds OK at first glance. After all, who wants to fill out unnecessary forms. The problem is that if you go a decade without making a non-deductible contribution, are you really going to remember your tax basis? My recommendation is that you file one every year just to keep up with it.

[Ani]

What did you do after you made the non-deductible contributions? If you just left them in the TIRA and didn't make any withdrawals/conversions, it should be trivial to do the 8606; just 4 lines. Start w/ the earliest yr first and then move to next yr.

+1

OP, are your non-deductible IRA contributions still in a traditional IRA account (tIRA) or did you convert them to a Roth IRA (step 2 of the backdoor Roth)? If you haven’t converted at least your basis yet, go ahead and do so as the future growth in a Roth IRA will be tax free. A 2020 rollover will not impact your Form 8606 for 2019 or prior years.

If you also rollover the tIRA growth to the Roth IRA, it will be taxed (likely an insignificant amount) on Form 8606 in the year of the rollover. Go ahead and roll it over otherwise any future backdoor Roth will be subject to the pro rata rule.

If you Intend to leave the non-deductible IRA contributions in the tIRA, then yes it might better for you to contribute to a Taxable account than a tIRA.

Yes- they are still in the TIRA mixed with rollover IRAs.

Yes- my plan is to ultimately do a backdoor roth conversion.

For now- will let IRA know my basis via form 8606.

[FactualFran]

Some of the data for 8606 is supposed to come from Form 5498. 5498 is always issued late. 2018 was dated 5/20/2019, and I haven't seen the one for 2019.

Exactly what data is supposed to come from Form 5498? I have included a Form 8606 with my income tax returns for many years, and I have never needed any data from Form 5498.

[Katietsu]

Sounds like you found pitfall #1 in non-deductible contributions. Make sure that you don't fall into pitfall #2. That one is that there is no requirement to file an 8606 in subsequent years when you don't make non-deductible contributions. That sounds OK at first glance. After all, who wants to fill out unnecessary forms. The problem is that if you go a decade without making a non-deductible contribution, are you really going to remember your tax basis? My recommendation is that you file one every year just to keep up with it.

I would not recommend that you file a form that is not supposed to be filed. You do want to make sure it is tracked though. If you use TurboTax every year and pull your data forward, the basis information will pull forward even with no 8606 for a given year. I would hope the others do the same.

You can make sure to include a copy of the most recent 8606 in with your tax return for each year, even if that means a 2016 Form 8606 with a 2019 return. I went one step further and created a folder just for IRA contributions and conversions. It includes all the 5498 forms, Form 8606’s, first page of 1040 for years with deductible contributions, and a running list of all contributions and conversions.

[HomeStretch]

What did you do after you made the non-deductible contributions? If you just left them in the TIRA and didn't make any withdrawals/conversions, it should be trivial to do the 8606; just 4 lines. Start w/ the earliest yr first and then move to next yr.

+1

OP, are your non-deductible IRA contributions still in a traditional IRA account (tIRA) or did you convert them to a Roth IRA (step 2 of the backdoor Roth)? If you haven’t converted at least your basis yet, go ahead and do so as the future growth in a Roth IRA will be tax free. A 2020 rollover will not impact your Form 8606 for 2019 or prior years.

If you also rollover the tIRA growth to the Roth IRA, it will be taxed (likely an insignificant amount) on Form 8606 in the year of the rollover. Go ahead and roll it over otherwise any future backdoor Roth will be subject to the pro rata rule.

If you Intend to leave the non-deductible IRA contributions in the tIRA, then yes it might better for you to contribute to a Taxable account than a tIRA.

Yes- they are still in the TIRA mixed with rollover IRAs.

Yes- my plan is to ultimately do a backdoor roth conversion.

For now- will let IRA know my basis via form 8606.

If the tIRA has a significant pretax balance from the rollovers and if you are not aware of the pro rata rule, read the BH wiki page on Backdoor Roth before you convert your tIRA basis.

[AQ]

A related but separate question: I filed 8606 forms every year. Do I really need to keep all of them, or simply keep the latest one since the latest one would have the cumulative basis?

[Ani]

+1

I’ve posted many times before. CPA is not necessarily a tax preparer. These are two different disciplines. It’s like asking a cardiologist to work on your teeth because both a cardiologist and a dentist can be addressed as Doctor.
[/quote]

This is a meaningless analogy.

I dont think going to the CPA for personal taxes sounds as extreme as going to the cardiologist for getting dental work.

No sane person goes to a cardiologist to get their teeth fixed and if someone did go to a cardiologist to get their teeth fixed- I would hope the cardio would tell them- i dont fix teeth - go see a dentist.

Similarly- if CPAs dont file personal tax returns - they should say so and direct people to the right place, instead of taking 1 grand and doing shoddy work- which is exactly what happened.

That being said- reading stuff on bogleheads and turbotax forums after being serially screwed by CPAs has helped me immensely and I plan on filing taxes myself using turbotax in future.

[kaneohe]

A related but separate question: I filed 8606 forms every year. Do I really need to keep all of them, or simply keep the latest one since the latest one would have the cumulative basis?

If you keep your older tax returns , why not keep the 8606 which is part of them. Yes the latest one shows the basis you need for your next move , but the older ones show how you got there.

I would like to thank OP for starting this thread. My non-deductible contributions were done so long ago, I couldn't remember if I filed the 8606s for them tho I had a record of the non-deductible contributions in a separate log.
I did find the 8606 for 1995 & 1996 and am assuming that I filed them for the next 5 yrs. When I checked the log,
I discovered what looked like an omission in one yr and w/ DW similar contribution , seemed like we would be paying a double tax on 7K of contributions. I wasn't about to amend returns so far back (maybe even could not) and then was relieved to discover further in the log that what had started out as non-deductible contributions that one yr ended up being recharacterized to Roth later in the yr.

[HomeStretch]

A related but separate question: I filed 8606 forms every year. Do I really need to keep all of them, or simply keep the latest one since the latest one would have the cumulative basis?

Yes, along with other related documents - Form 5498, 1099-R, etc. until all distributions are made per the IRS. See Form 8606 2019 instructions page 6 “What Records Must I Keep?”:
https://www.irs.gov/pub/irs-pdf/i8606.pdf