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Is it worth it to correct mistake in Traditional & Roth IRA contributions in previous year taxes?

I believe I made a mistake in my 2015 taxes, entering my pre-tax and Roth 401(k) contributions as traditional and Roth IRA contributions and paid a penalty on it for over-contributing.  I do not have a traditional or Roth IRA and mistook my company 401(k) plan contributions from box 12 on my W-2 as traditional and Roth IRAs in the Retirement and Investments area of my Deductions & Credits section.

What affect would this have if I were to correct my 2015 filing?  I received a refund from both my federal and state taxes.  And would it flag if I didn't enter anything in my 2016 taxes, even if I had mistakenly entered something for last year?


Thanks!

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1 Best answer

Accepted Solutions
dmertz
Level 15

Is it worth it to correct mistake in Traditional & Roth IRA contributions in previous year taxes?

You must amend your 2015 tax return to make the necessary corrections.  There is the potential for a number of different areas of your tax return to be affected, but there are certain to be at least a few important areas that are affected even if it does not change your tax liability for 2015.

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6 Replies
dmertz
Level 15

Is it worth it to correct mistake in Traditional & Roth IRA contributions in previous year taxes?

You must amend your 2015 tax return to make the necessary corrections.  There is the potential for a number of different areas of your tax return to be affected, but there are certain to be at least a few important areas that are affected even if it does not change your tax liability for 2015.

Is it worth it to correct mistake in Traditional & Roth IRA contributions in previous year taxes?

Thanks for your quick reply. I ran through the instructions at <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/2693843">https://ttlc.intuit.com/questions/2693843</a> and it changed my 2015 return to remove a Form 8606, and increased the amount I overpaid by $1, and prompted me to really confirm that I needed to amend because it didn't detect any differences between my original 2015 return and my amended return.  I'm hesitant to go forward because this time of year gives me horrible anxiety and I try to avoid as much interaction with the IRS tax forms as possible.  Hopefully without offended you, do I really need to go forward?  And would I need to file for an extension for 2016 until the amended 2015 return is accepted?  Thanks again!
dmertz
Level 15

Is it worth it to correct mistake in Traditional &amp; Roth IRA contributions in previous year taxes?

TurboTax is not particularly good about providing the appropriate changed form if it's a form that would not have been included had the original tax return been filed correctly in the first place.  Since TurboTax removed the Form 8606, with the amendment I would file a manually prepared corrected Form 8606 showing a zero on line 1 and the corresponding changes down the form, particularly correcting the basis originally reported to the IRS on line 14.  Absence of a Form 8606 in an amendment does not change the originally filed Form 8606.  By not filing a corrected Form 8606, you run the risk of the IRS questioning the original Form 8606 when they do not receive a Form 5498 from any IRA custodian corroborating your reporting of a nondeductible contribution.  In fact they *should* question it.

Your amendment would consist of just Form 1040X and the corrected Form 8606.  The corrected Form 8606 would show a zero on line 1 instead of the originally reported amount and, if line 2 of the original was zero, a zero on line 14.  Since nothing was reported on the original Form 1040 line 32 or Form 1040A line 17, I'm not sure why the amendment would result in any additional refund or tax due.  I would have expected no change.

See the instructions for 2015 Form 8606 regarding amending the form:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-prior/i8606--2015.pdf">https://www.irs.gov/pub/irs-prior/i8606--2015.pdf...>

You do not have to wait to file your 2016 tax return.  However, it would normally be best to begin your 2016 ta return by transferring in from your amended 2015 tax file instead of the original.

Is it worth it to correct mistake in Traditional &amp; Roth IRA contributions in previous year taxes?

Thank you!  You've been a big help in the information given and letting me know what to expect.  I appreciate it, more than you can probably imagine.

Is it worth it to correct mistake in Traditional &amp; Roth IRA contributions in previous year taxes?

For others, and because I'm a fan of completeness, I also noticed that Turbo Tax removed Form 5329 from the amended return because apparently there was a $1 penalty for excess contributions to the Traditional and Roth IRAs that I do not have.  This is the $1 refund change in the 2015 return.  I will file an amended form 5329, as well.  Thanks again.
dmertz
Level 15

Is it worth it to correct mistake in Traditional &amp; Roth IRA contributions in previous year taxes?

I agree.

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