@Pattmark11 wrote:
I accidentally put too much money in a Traditional IRA in 2018 (didn't realize I didn't qualify for the full $7k due to amount of income over threshold on worksheet) , and realize I didn't get the advantage of pretax contribution (and don't want to be double taxed), and have prepared to send in a late 8606. I have other Traditional IRAs, so I don't think I can do a back door IRA.
1) will I need to pay $50 to file a late 8606, Or should I just see if the IRS sends me a bill?
2)The non-deductible portion is approximately $5000 of a $10000 Traditional IRA. I am 60 . Is there anything I can do other than withdraw it in say 1 or 2 years? Is it complicated to take a traditional IRA and identify it as a prorated amount deductible/ non-deductible? Are there any references you can provide me that I could review? I'm guessing there is nothing I can do to convert this to a roth, unless maybe I were to combine my traditional IRA accounts , if even that would work? should I figure out my IRA's value before and after the deposit for proration purposes? I'd also prefer not to resubmit an amended return for 2018, and have it scrutinized
#1 Send the 8606 and ask for a waiver of the penalty. Any reasonable reason should be accepted.
#2. You can NEVER withdraw ONLY the nondeductible part - it must be prorated over the entire value of ALL Traditional IRA accounts which include SEP and SIMPLE IRA's. (For tax purposes you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together).
For example using rough figures: if you had $60K of nondeductible contributions in an IRA with a total value of $600K (10:1 ratio), then when you take a $60K distribution from any IRA account $6,000 would be nontaxable and $54,000 would be taxable (same 10:1 ratio) , with the remaining $54K of basis staying in the IRA for future distributions. As long as there is any money in the IRA, there will be some basis.
TurboTax will ask for your non-deductible "basis" and then the *Total Value* of *all* Traditional IRA, SEP and SIMPLE accounts as of Dec 31, of the tax year. That is so the prorating of the basis can be properly proportioned between the current years distribution and the remaining IRA value. That is done on the 8606 form.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
