Forgot to report back door Roth conversion for past 5 years

[aayush246]

Hi,

I just realized that I have not reported backdoor Roth conversions in my tax filings with TT for the past 5 years.

I have self-filed with TT all the years. My Form 1044 4a and 4b sections are blank in 1040. I have few questions on my situation which is little complicated.

1. Should I amend the taxes for all the 5 years? If yes, both 1040 and 8606 forms need to be updated? Also TT allows me to amend online for last two years. What should I do for the other 3 years? I searched online that taxes for only one year need to be amended with a note to IRS for all the adjustments for all the 4 years. Is that true? If yes, how this can be done? My local CPA is recommending to amend all the 5 years of tax filings with a whopping bill.

2. I have 1099-R and 5498 forms from my brokerage account. Some years I made the transaction for 2 years in current year. For eg, 2020 contribution before filing my taxes in March 2021 and other one in June 2021. 1099-R for 2021 shows $12k. Once I amend the taxes, should I only report $6k or full $12k in 2021?

3. For last few years, I received 1% match from Robinhood in IRA contributions. I transferred all $6,060 to Roth IRA. How do I handle them while reporting?

Thanks in advance for your help.

Regards,

Aayush

[Opus 17]

1. Maybe and Yes.  If the only thing that changes is form 8606, you can file that alone (it has a signature page). If other things change, you must amend the entire return (such as, the taxable income from the bonus you describe).

2. For prior years not online, you can purchase Turbotax to install on your own computer, from the link below for "products for prior years."  If you already paid to file online for that year, try calling support and see if they will push a free copy to your account.  If you need to go farther back than Turbotax supports, you will need to amend manually or see a professional.  It's not too difficult to do manually, just make sure you download the correct forms and instructions for each year from the IRS web site, follow your prior return, and make the changes needed.  With an  amended return, you don't need to submit everything all over again, just the forms that change (1040, 8606) and the 1040-X cover page that summarizes the changes. 

If you make a contribution for 2021 in March 2022, that is reported on your 2021 tax return (form 8606). Then, if you make another contribution in April 2022 for 2022, and convert the entire amount, the 2022 contribution and the conversion are reported on your 2022 return.  Contributions are always reported for the tax year you made them (including if you made them retroactive); conversions are always reported exactly when they happen (because conversions are never retroactive). 

3. If you make a $6000 non-deductible contribution to a traditional IRA, and convert more when you do the conversion (because of a promo, or investment gain, or any other reason), that extra amount is taxable income. It's calculated on form 8606 and transferred to form 1040 line 4b (taxable amount). 

[fanfare]

"If the only thing that changes is form 8606, you can file that alone (it has a signature page). "

The proper way to file Form 8606 is attached to Form 1040-X.
Form 8606 can be mailed by itself only when you are otherwise not required to file a tax return.

If you already filed and send Form 8606 by itself, IRS will send it back to you.

@Opus 17 

@aayush246 

[aayush246]

Thanks a lot @Opus 17  for your guidance. I have started to amend the 2023 taxes as an example. Could you please help me with the below confusion. Form 1040 is showing 12,625 in 4a and 6,125 in 4b. Its counting 6,125 as the taxable income which I guess is incorrect. This goes back to 2 years of conversion reported in one year. I guess, I should over ride it by 6,065 in 4a and 65 in 4b? Hence my taxable income in 2023 would be $65. The same I need to do for 2022: 6060 in 4a and 60 in 4b. Taxable income increase by 50?

[fanfare]

You have to start amending with the earliest year in error, then use the resulting Form 8606 for the next year.

@aayush246 

[Opus 17]

You have to go back to the very beginning of the unreported transactions.  Each year's form 8606 follows from the previous year.  Specifically, line 2 (basis in traditional IRAs) should be read as starting basis, and line 14 is your new total basis at the end of the year, so line 14 from 2020 is used as line 2 from 2021, and so on.

If you always completed the backdoor Roth IRA correctly in the same year as the contribution, and never had any traditional IRA funds to start, then line 2 and 14 will always be zero.  But you already said that sometimes you didn't do that.  So best to go back to the beginning.