Form 8606

[ctj]

Am confused about Form 8606 and I'd like to get clear. Everything here relates to traditional IRAs. In several of the last ten years TurboTax has generated a Form 8606 for us (married filing jointly) because I have been contributing to my IRA with varying success at earning deductions. Each of those forms seems to have just the "Total basis" for that tax year (which I guess means the non-deductible part). This past tax year (2018) my wife joined me in contributing to her trad IRA for the first time, but the 8606 only showed my non-deductible portion (all). I'm sure all of her contribution was also non-deductible.

1) Unless I misunderstand, shouldn't the Form 8606 be accumulating all our past years' amounts into one current amount?

2)  Or do I have to keep track of the amount every year myself for reference when I start to withdraw?

3) How...or will I be prompted for my Form 8606 info when I begin to withdraw?

4) Do I need to amend or re-file my most recent 8606 for 2018 to reflect our total non-deductible contribution amount?

(FYI, after years of using Deluxe, this year I finally gave up trying to figure out the Deluxe functionality and started using Home and Business.)

Thanks! Sorry for length...

[VolvoGirl]

IRA stands for Individual Retirement Account.  Do not add hers to yours.  You would each have your own 8606 if needed.  @dmertz 

[dmertz]

VolvoGirl is correct.  Form 8606 is an individual form.

Line 14 of Form 8606 should show the entire accumulated basis in nondeductible traditional IRA contributions of the individual.  You should see line 14 of the last filed Form 8606 for the individual carrying forward to line 2 of the next filed Form 8606 for the individual.  If you transfer your previous year's TurboTax tax file into the current year's TurboTax to begin your current year's tax return, TurboTax will bring in your basis information and use it to populate Form 8606 line 2 for the current year.

For those married filing jointly, the modified AGI limit for being eligible to deduct a traditional IRA contribution is substantially different for the spouse who is not covered by the workplace retirement plan from the limit for the spouse who is covered by a workplace retirement plan.  It's not uncommon for the spouse with active participation in a workplace retirement plan to be ineligible to deduct the contribution while the spouse without active participation in a workplace retirement plan to be eligible to receive a deduction for the contribution.

[ctj]

@VolvoGirl OK, the fog is starting to lift, thanks!

[ctj]

@dmertz OK, as I mentioned to volvogirl, I feel like I'm getting somewhere.

Ah...Line 14. I didn't read the form closely enough to notice confirmation of my intuition around accumulation because all of my 8606s have the same amounts EVERYWHERE on the form. In other words, for each of my several 8606s, Line 14 reflects only that year's accumulation. So to be extra clear, the 8606 in my name (yes) for 2018 has the same current year's amount on Lines 3 and 14 and does not include any figures from my past 8606s. Line 2 on all my 8606s is zero. I have almost always carried over TurboTax from the previous year for the last 15 years maybe, but as I so alluded, the earlier years were on Turbo Deluxe which has gone through confusing and sometimes controversial functionality changes.

Both the wife and I are covered by retirement plans at work. That combined with our borderline income fluctuations around the income limits for deductibility sometimes makes us super ineligible for IRA deductions I guess...but TurboTax did not generate an 8606 for my wife this past year who made her IRA contribution debut in 2018.

1) How should I correct the non-accumulation on my current and future 8606s?

2) What should I do about the missing 8606 for my wife?

Thanks much!

[dmertz]

1. You should probably file corrected Forms 8606 for yourself that failed to include on line 2 the previous year's correct line 14 amount.
2. Make sure that your wife's traditional IRA contribution has been properly entered as her own contribution (not as any part of your own contribution) and that it is indeed nondeductible.  (Even if modified AGI allows it to be deducted, you can elect to make it nondeductible.)  If it is nondeductible (including those contributions where the election has been made to make it nondeductible), TurboTax will prepare Form 8606 to show that.  (There might have been an early version of 2018 TurboTax that had some problem with Forms 8606, but that was corrected in late 2018 or early 2019.  Expect the current version of 2018 TurboTax to behave correctly in regard to preparing Form 8606 Part I.)

For many years there really haven't been any changes to TurboTax with regard to entering nondeductible traditional IRA contributions.  One thing to be aware of:  If you inadvertently indicate that you did not make nondeductible traditional IRA contributions, TurboTax will silently delete any of the basis information transferred in from the previous year's tax file.

[VolvoGirl]

You mean all the 8606 for different years?  You only have one 8606 per year (per person).

And as dmertz said if you accidentally say you did not make any non deductible contributions it will mess you up.  I did that on my friends return and had to amend the last 3 years to straighten it out.  I forgot she had a basis in the account.  

[ctj]

@dmertz OK, I THINK I'M ALMOST THERE...
1) You should probably file corrected Forms 8606 for yourself that failed to include on line 2 the previous year's correct line 14 amount.

I SEE HOW I CAN DO THAT BY GOOGLING "IRS 8606 2014" AND ETC. FOR THE VARIOUS YEARS FOR WHICH I HAVE AN 8606 (NONE OF WHICH SHOW CARRYOVERS). AND I SEE WHERE TO ACTUALLY SNAIL MAIL IT.

2) Make sure that your wife's traditional IRA contribution has been properly entered as her own contribution (not as any part of your own contribution) and that it is indeed nondeductible.

SO CONFUSING, SORRY...I SEE NOW IN OUR 2018 PDF THAT THERE ARE SEPARATE 8606s FOR BOTH MY WIFE AND I (THE CONFUSION GOING BACK I GUESS TO WHEN I WAS ASSUMING IT WAS ONE FORM FOR US AS A COUPLE). I'LL WATCH IT LIKE A HAWK NEXT YEAR TO MAKE SURE HER/OUR NON-DEDUCTIBLE INFO IS TRANSFERRED.

If you inadvertently indicate that you did not make nondeductible traditional IRA contributions, TurboTax will silently delete any of the basis information transferred...

THE "INADVERTENTLY INDICATE" THING SEEMS LIKE A REAL POSSIBILITY FOR WHAT I MAY HAVE BEEN DOING FOR YEARS.

How do I get Turbotax to reflect my corrected errors going forward? Do I just try and follow the prompts more correctly next tax year 2019 and police the carryover lines?

[dmertz]

Going forward, I would make sure that your 2018 TurboTax tax file has the correct amount shown for you and your wife on TurboTax's IRA Information Worksheet Part I (correcting any error by amending using TurboTax), then transferring in to 2019 using the amended tax file and checking the IRA Information Worksheet Part I in 2019 TurboTax.

[ctj]

@dmertz OK, first I’ll deal with amending the old 8606s by hand, and then for 2018 fix that 8606 within TurboTax and check if that fixes the 2018 Information Worksheet Part I within TurboTax…I guess by generating a new PDF of the whole thing. If that doesn’t work, I’ll revisit this thread. If that’s a plan, thanks very much again!

[Brian79]

Why doesn't it work?