Contributed to Traditional IRA (Non-deductible) for each of the last few years but just noticed in 2019 TT that line 2 of 8606 - Basis - isn't correct. Not sure why Turbo Tax didn't correctly carry forward the total basis for previous years, that's the reason I use TT on the same computer to carry forward the prior year balances...
Anyway, TT allows me to correct line 2 - basis on the 2019 return but asks for an explanatory statement to include with the amendment since it's different to last year's 8606.
Please can you recommend what brief explanatory statement to include?
The line 2 carry forward amount should come from line 14 of the last 8606 filed. If the carried over amount is not shown at all then that happens sometimes, but I have never seen the carry over amount, if present, to be different than line 14 from the last 8606. Have you looked at last 14 of the last 8606?
Thanks for note. Yes it ties to last year’s line 14 form 8606 but that had the carry forward error ie missing the basis from the prior year, so, cumulatively, most of the basis is missing.
I’ve established the basis needs to be corrected and TT is allowing me to do that with an explanatory statement. I’m wondering what to put on that explanatory statement. Any thoughts?
Nothing, since you are just fixing the basis that TurboTax failed to carry forward, not adding basis that had not been reported on a 8606 before. The explanation is for things like rolling a 401(k) with basis into a IRA so you need to add that to the 8606 since 401(k)'s are not reported on a 8606 so you need to tell the IRS where the new IRA basis came from.