Hello,
During the course of preparing my 2021 returns, I realized that I have been stupid and naive about IRA tax reporting. I am hoping you can help me figure out how best to correct the mistakes I have made. Below are the details of my situation:
1. I opened my first traditional IRA account in 2016 prior to the 2015 tax deadline. I then added a non-deductible contribution of $5500 (max limit in that tax year) for the 2015 tax year: I however failed to report that using Form 8606.
2. In 2016, I switched jobs. Not wanting to maintain multiple 401K accounts, I rolled over 100% of my 401K money with my old company (a) partly into the IRA account I opened in 2016 and (b) rest in my new company's 401K. Please don't ask me why I did this...I was a complete tax/finance idiot at that time. So at this point, my IRA account has a mix of deductible and non-deductible contributions.
3. I received a 1099-R from my old company's 401K account documenting the rollover distribution, which I then reported in my 2017 taxes.
4. I opened my 2nd traditional IRA account in 2021. I made 2 non-deductible contributions (a) $6000 for Tax year 2020: again failed to report that in Form 8606 and (b) $6000 for Tax year 2021, which I will be reporting this year.
5. I converted 100% of funds in my 2nd IRA account into a Roth in 2021.
So far I have figured out how to handle #4 and #5: I will be doing a late submission of Form 8606 documenting my 2020 non-deductible IRA contribution. I know what to do for my 2021 taxes as well.
What I am very confused about is how do I go about correcting/documenting my transactions from 2017 and earlier? Should I:
1. Submit a 2015 8606 documenting the $5500 non-deductible contribution?
2. Report the $5500 as the basis on my 2020 8606? I am assuming that my pre-tax rollover funds should not be considered as part of the basis.
3. Report $5500 + $6000 as the basis on my 2021 8606 (handled by Turbotax...I don't intend on manually filling in 8606 for my 2021 taxes).
I would really appreciate the advice here. Didn't realize how much I had ignored reading basic information about the IRA before venturing into it. Lesson learned and will be applied 2022 onwards.
Many thanks!
Avi
