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Level 1

Contributed to an IRA annually from 2014, didn't deduct the tax benefit. Converted to Roth IRA in 2017 & getting taxed on conversion. Is there a way to reduce the tax?

Contributions were made annually from 2014 through 2016 with the conversion taking place in 2017.  Thought the IRA was a Roth IRA but found out after it wasn't, hence the need to convert.

How do we reduce our tax liability on the conversion when we didn't claim the benefit of the traditional IRA deductions?  I don't have the Turbo Tax returns for 2014 or 2015, only 2016.

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Accepted Solutions
Level 20

Contributed to an IRA annually from 2014, didn't deduct the tax benefit. Converted to Roth IRA in 2017 & getting taxed on conversion. Is there a way to reduce the tax?

You'll have to do one of two possible things for each year 2014 through 2016.  You'll either need to file amended tax returns to claim the deduction for the traditional IRA contributions or you'll need to file the late 2014, 2015 and 2016 Forms 8606 to establish your basis in nondeductible traditional IRA contributions.  Begin with 2014 since line 14 of each Form 8606 will carry over to line 2 of the next Form 8606 that you prepare.  Whether it will be more beneficial to claim the deduction or the nondeductible contribution for each year will depend whether or not you were eligible for a deductible contribution and on your relative marginal tax rate between the year you are correcting and 2017.  The deadline for amending your 2014 tax return to add the deduction is generally April 15, 2018.

After entering your 2017 Form 1099-R into 2017 TurboTax, click the Continue button on the Your 1099-R Entries page.  Assuming that you've prepared at least on Form 8606, when TurboTax ask if you made nondeductible traditional IRA contributions, answer Yes, then enter the amount from line 14 of last of the Forms 8606 that you prepared for years 2014 through 2016.  Also enter your balance in traditional IRAs that you might have had on December 31, 2017.  Finally, under Deductions & Credits enter any traditional IRA contribution you might have made for 2017.

The taxable amount of your Roth conversion will be calculated on 2017 Form 8606.

3 Replies
Level 20

Contributed to an IRA annually from 2014, didn't deduct the tax benefit. Converted to Roth IRA in 2017 & getting taxed on conversion. Is there a way to reduce the tax?

Did your 2014 through 2016 tax returns include Forms 8606 as required to report the nondeductible traditional IRA contributions?
Level 1

Contributed to an IRA annually from 2014, didn't deduct the tax benefit. Converted to Roth IRA in 2017 & getting taxed on conversion. Is there a way to reduce the tax?

There was no form 8606 filed.
Level 20

Contributed to an IRA annually from 2014, didn't deduct the tax benefit. Converted to Roth IRA in 2017 & getting taxed on conversion. Is there a way to reduce the tax?

You'll have to do one of two possible things for each year 2014 through 2016.  You'll either need to file amended tax returns to claim the deduction for the traditional IRA contributions or you'll need to file the late 2014, 2015 and 2016 Forms 8606 to establish your basis in nondeductible traditional IRA contributions.  Begin with 2014 since line 14 of each Form 8606 will carry over to line 2 of the next Form 8606 that you prepare.  Whether it will be more beneficial to claim the deduction or the nondeductible contribution for each year will depend whether or not you were eligible for a deductible contribution and on your relative marginal tax rate between the year you are correcting and 2017.  The deadline for amending your 2014 tax return to add the deduction is generally April 15, 2018.

After entering your 2017 Form 1099-R into 2017 TurboTax, click the Continue button on the Your 1099-R Entries page.  Assuming that you've prepared at least on Form 8606, when TurboTax ask if you made nondeductible traditional IRA contributions, answer Yes, then enter the amount from line 14 of last of the Forms 8606 that you prepared for years 2014 through 2016.  Also enter your balance in traditional IRAs that you might have had on December 31, 2017.  Finally, under Deductions & Credits enter any traditional IRA contribution you might have made for 2017.

The taxable amount of your Roth conversion will be calculated on 2017 Form 8606.