5000 into IRA we were not able to defer as over contribution limit. When closed IRA, worth 3500. We were unable, to claim a loss; all 3500 was considered taxable.

[macuser_22]

By defer, do you mean it was a non-deductible contribution to a Traditional IRA?

What code is in box 7 on your 1099-R?

Is the box 2b total distribution box checked?

What year was it a contribution for?

Did you file a 8606 form reporting the non-deductible contribution in the tax year that the contribution was made if before 2017?

[smarshmanorders]

It was a non-deductible contribution to a traditional IRA.  We did not file an 8606 in that tax year (approx 2009).  The 1099-r box 7 had a 7 and an X for IRS/SEP/Simple.  The account moved between Think Or Swim and TD Ameritrade and lost any trail it had.

[macuser_22 · Accepted solution]

In order to apply the non-deductible contribution a 2009 8606 reporting the nondeductible contribution on line 1, 3 and 14 is required. 

When you enter the 1099-R the interview, after the 1099-R summary screen will ask for the prior year non-deductible basis.  You would enter the $5,000 from line 14 on the 8606.  Then it will ask for the total 2017 year end value of all Traditional, SEP and SIMPLE IRA's that still existed.   Only if no IRA accounts still existed would that be zero.

If it is zero then the $3,500 would go on the 1040 form line 15a with a zero taxable amount on line 15b and the $1,500 loss would be carried to line 23 on Schedule A as an itemized deduction.

You can mail a stand-alone 8606 form for 2009 that you misssed and download from the IRS here:

Form:  https://www.irs.gov/pub/irs-prior/f8606--2009.pdf
Instructions: https://www.irs.gov/pub/irs-prior/i8606--2009.pdf