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STACIE56
New Member

TRADITIONAL IRA COST BASIS

I have Nondeductible Contributions Form 8606 for 2 years prior that I didn't do a cost basis on.  They both show 0.  Can I add that basis on the current year 2020 return?  And if so, how do I figure that basis?  Is is the dollar amount of contributions that were nondeductible?

5 Replies
macuser_22
Level 15

TRADITIONAL IRA COST BASIS

The non-deductible contribution as reported on a 8606 line 1 IS the cost basis.  Exactly what was reported on the 8606?   

 

Also and non deductible can only be reported on a 8606 for the tax year that the contribution was for.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
fanfare
Level 15

TRADITIONAL IRA COST BASIS

"Also and[sic] non deductible can only be reported on a 8606 for the tax year that the contribution was for."

 

The idea is to put the total prior years basis on the current Form 8606.

You don't need an amount on line 1 to enter an amount on line 2.

 

I've always argued to put the missing total prior years basis on the current year form 8606 and
send in one form attached to your tax return,  and be done with it.
I get a lot of pushback here on that suggestion.
Use your own judgement.

 

"Is is[sic] the dollar amount of contributions that were nondeductible?"

 

It is the total amount of contributions for which you did not take a deduction.

 

macuser_22
Level 15

TRADITIONAL IRA COST BASIS

That is not what the regulations require. I will not post replies that are not consistent with the regulations.  You might get away with it just like most driver  doing 80 on the freeway do, but get caught, as some do, and the fines are big.    It is always better to comply with the law.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
fanfare
Level 15

TRADITIONAL IRA COST BASIS

There is nothing falsified.

It is just that your prior 8606 (missing)  won't cross-check with your most recent 8606.

 

If IRS makes an issue of it, they will send you a letter.

macuser_22
Level 15

TRADITIONAL IRA COST BASIS

The problem is the IRS usually does the "cross check" when there is a distribution that claims prior nondeductible contribution to lower the tax and that can be years later.    By that time the taxpayer has long forgotten what they had done in the past but the IRS records for IRA basis go back to 1987.

 

But do what you want.  I go by the IRS rules that say each nondeductible is to be reported on the 8606 for for the year of the contribution.    All past years 8606 forms are available on the IRS site.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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