I appreciate the quick reply @dmertz. I called the IRS again to see if they could tell me what exactly was updated to result in the tax bill, but one of their systems was down and they couldn't see my 1040-X. They said to call back in a few weeks.
It seems like the IRS is making a lot of errors lately, perhaps due to the learning curve for new employees. The response you got from the IRS makes no sense. Form 8606 is for IRAs and has nothing to do with pensions an annuities; you reported no change related to pensions and annuities. Nothing about reporting a nondeductible traditional IRA contribution could increase income tax liability.
Ok, that was my understanding, too.
$1,826 is suspiciously exactly equal to 22% of $8,300. If this amount of additional income would have fallen in the 22% tax bracket, that might shed light on something entirely unrelated to Form 8606. Pension an annuity distributions are reported on 2021 Form 1040 line 5a/b.
My 2021 Form 1040 lines 5a/b are both blank. Also, since all fields 1-23 in 2021 Form 1040-X were left blank, there were no updates to pensions & annuities in that form.
The recharacterization had nothing to do with a Roth conversion, so it would have been better if your explanation of the recharacterization made no mention of a Roth conversion or anything about your 2022 tax return.
Got it. That might have led to the confusion.
Would you suggest adding anything else to my response letter below?
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SSN:
Tax Year: 2021
Form: 1040
To Whom It May Concern:
On January 1, 2024, I received a letter from the IRS stating that "We made the changes you requested to your 2021 Form 1040 to adjust your pensions and annuities. As a result, you owe $2,035.84." I believe the tax bill is incorrect and have provided my reasoning below.
In August 2023, I sent the IRS a 2021 Form 1040-X and 2021 Form 8606. The 2021 Form 1040-X had no updates other than an "Explanation of Changes" in Part III. The explanation said that I was fixing my mistake of not including my 2021 Form 8606 with a 2021 Form 1040-X. The explanation also described the recharacterization of my 2021 Roth IRA contributions.
I believe the tax bill is incorrect because I have not made any adjustments to pensions or annuities. In my 2021 Form 1040-X, fields 1-23 were left blank. In my 2021 Form 8606, I reported that a nondeductible traditional IRA contribution was made and that no conversion was performed, thus giving me a basis for 2021. Since none of the following would result in increased tax liability, I believe the tax bill is incorrect.
Please let me know if I can provide any additional information.
Thank you,
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