Late filing of form 8606

[kjmkjm]

Hello!  On April 11 2018 I made a nondeductible traditional IRA contribution of $1,900 for the 2017 tax year.  It was my first-ever nondeductible IRA contribution. 

Then on April 11 2019 - - when I was age 51 - - I made a nondeductible traditional IRA contribution of $6,500. 

In neither case did I file a form 8606, or any other form, for that matter.  Please what do I do?

Thank you!

[JulieS]

You should file a Form 8606 for  2017 and 2018 (assuming your applied your 4/11/2019 contribution to 2018). You don't have to file an amended tax return, you can just file the Form 8606 by itself. 

Be sure to sign the form at the bottom of page two and use the correct year's form.

Click here for 2017 forms.

Click here for 2018 forms.

Technically you can be fined $50 for failing to file the form on time, but the penalty can be waived if you have reasonable cause.

Click here to learn more about reasonable cause.

[1967jeff1967jeff]

Julie, thank you most sincerely for your expert reply.  I appreciate it very much.

To show reasonable cause, do I simply include a letter with the form 8606 that I mail in?  Or do I wait for the IRS to send me a bill?

[MaryK4]

It is best to send the request for reasonable cause with the Form 8606,

@1967jeff1967jeff

[1967jeff1967jeff]

Thank you, Mary.

A different idea:  I actually don't mind paying the $50 dollar fee for filing a late 8606.  In fact, I'd prefer to pay it up front.  Would I then just include a $50 check with the lat 8606 that I mail in?

[DavidD66]

I would not send payment with the Form 8606, as it's unlikely the IRS will assess the fee.

[macuser_22]

No.  If in the unlikely chance that the IRS imposes the fee then they will send a separate bill - do not volunteer it.

[1967jeff1967jeff]

Thank you all so very much.  It sounds like the right thing to do is to include not a check with the late 8606, but rather a letter.  If I may, does the below text sound good?  This would be for the letter enclosed with the 2017 8606:

I request a penalty waiver because I used ordinary prudence by relying on guidance from a credentialed advisor who turned out to be incorrect on this one matter.

This has just become clear to me, and I now take immediate corrective action. I do this in three ways. First, I file this 2017 8606. Second, separately I am filing a 2018 8606 for a nondeductible IRA contribution made in that year. Third, I will include a 2019 8606 with my 2019 Form 1040 to report a nondeductible IRA contribution in that year.

Thank you all again, most sincerely.

[JohnB5677]

Yes, that correspondence to the IRS will work well.

[fulanimary]

Hi JulieS,

Thanks for your information.

What of when the nondeductible contribution to the Traditional IRA has earned some money (gain) e.g 7 cents, before converting to Roth IRA in a backdoor Roth IRA conversion; Won't I need to amend the tax return for that year?

Thanks in advance for your reply

[Anonymous]

for 7 cents I wouldn't.  did you know you can round forms to whole $'s.  49 cents or less rounded down to zero 50 cents or more rounded up to the next higher dollar. 

[Critter-3]

FYI ... general rules to follow when you plan to do a backdoor ROTH ...

1) ALWAYS have the contribution kept in a CASH account ... do NOT have it invested in anything that could make money not even a money market account

2) Give the broker explicit instructions to make the conversion as soon as possible per the institutions rules ... basically as soon as the ink dries.

3) This backdoor conversion ONLY works if the taxpayer has nothing in any traditional IRA account before or after the contribution/conversion. 

[fulanimary]

I used Vanguard,and in the traditional IRA the cash account is the settlement fund. Unfortunately it gained 7 cents by the time (which was the next day) their system allowed me to move the money into my Roth IRA account.

I also called them to move the money into my Roth IRA but I was told to wait for the money to settle before I could move it.

However for my first 8606 form which will be 2015 form 8606, on what line do I place the actual amount converted, the small earning of 7 cents e.t.c.

I'll need help in filling form 8606 for 2015, 2016, 2017, 2018 and 2019.

Thanks in advance for your reply

[macuser_22]

---

@fulanimary wrote:

I used Vanguard,and in the traditional IRA the cash account is the settlement fund. Unfortunately it gained 7 cents by the time (which was the next day) their system allowed me to move the money into my Roth IRA account.

I also called them to move the money into my Roth IRA but I was told to wait for the money to settle before I could move it.

However for my first 8606 form which will be 2015 form 8606, on what line do I place the actual amount converted, the small earning of 7 cents e.t.c.

I'll need help in filling form 8606 for 2015, 2016, 2017, 2018 and 2019.

Thanks in advance for your reply

---

No.   You enter the amount of the non-deductible contribution ONLY on the 8606 form.    Any earnings converted are taxable in the conversion by 7 cents rounds to zero.

If you also has non-deductible contributions for years 2015-2019 and did not file 8606 forms at the time then you must file a 8606 for each year.

Include  cover letter with an explanation and request a waiver of the $50 penalty  for each missed year.

You can obtain blank 8606 forms and instructions for each year here:

https://apps.irs.gov/app/picklist/list/priorFormPublication.html;jsessionid=e_Zqxthumq6fZ7BUHdhqodRz...

[fulanimary]

Hi macuser_22,

Thanks for your reply.

I've just noticed a major error on my 2019 tax return. I maxed my Traditional IRA as $6000 but it earned $1.55 before I converted to Roth IRA. Therefore $6001.55 was the actual amount converted

I e-filed my tax return through turbo tax but I've just noticed that: on my form 1040, my taxable income was listed as $502 on line 4b,and IRA distribution as $6002.

Also on my form 8606, turbo tax  left line 1 blank, then line 2 had $5500, line 3 had $5500, line was blank, line 5 had $5500, line 6 was blank ,line 7 had $6002 e.t.c

Looking at my form 8606 for 2019 tax return through turbo tax, certain things don't make sense.

Do you think I should just amend my tax returns?