topic 8606 for current and previous years in Deductions & credits

8606 for current and previous years

dtubint — Sat, 01 Feb 2025 16:18:18 GMT

Hello,

I started contributing to Traditional IRA since the last several years and none of those contributions are deductible. However I have never filed 8606 with the basis for those yearly contributions. Can I sum up all my previous years basis and add it in this years 8606 filing. Please advise how to take it forward. I have been using TurboTax since several years now but for some reason this form was not triggered for me or I completely missed it.

Re: 8606 for current and previous years

dmertz — Sat, 01 Feb 2025 16:30:52 GMT

You cannot simply total the nondeductible contributions that you failed to report and treat that as an adjustment to your basis. You were required by law to report the nondeductible contributions on Form 8606 for each year that they were made. You must file each Form 8606 that you were previously required to file. Box 14 of each Form 8606 will carry forward to box 2 of the next Form 8606 that you were required to file.

Had you entered the traditional IRA contribution and TurboTax determined that it was to be treated as nondeductible, TurboTax certainly would have created the necessary Form 8606. Check your previously filed tax returns to make sure that they contributions were not actually deductible and present on Schedule 1 line 20 (or as an IRA deduction on Form 1040 for years before 2018, the year Schedule 1 was introduced).

Re: 8606 for current and previous years

dtubint — Sat, 01 Feb 2025 19:14:28 GMT

Thanks dmertz.

I reviewed the previous forms in TurboTax and you are right the form 8606 exists for the year 2021, 2022. However the cost basis was always 0 for 2021 and 2022( perhaps this is what I goofed up ). I didn't find 8606 for 2023. Not sure how that was missed out but I know that it was amended for 2023 and may be due to that, it doesn't show up? I don't know. I believe I used Credit Karma for 2020 filing and was hoping to see the tax document in TurboTax but its not available. I will have to figure out how to access it. Given this circumstances, what would you advise.

2021:

14 Subtract line 13 from line 3. This is your total basis in traditional IRAs for 2021 and earlier years: 6000

2022:

14 Subtract line 13 from line 3. This is your total basis in traditional IRAs for 2022 and earlier years: 6000

2023: No Entry in the amended form.

Re: 8606 for current and previous years

fanfare — Sat, 01 Feb 2025 21:15:02 GMT

"You cannot simply total the nondeductible contributions that you failed to report and treat that as an adjustment to your basis. "

If this what you are proposing to do on Line 2 of your next submitted Form 8606, you might get away with it if you are not audited by the IRS, (unlikely)

AND the IRS computers don't flag it as an inconsistency with prior Forms 8606. (likelyhood unknown).

Note that Form 8606 is not filed if you took no relevant action for 2024.

@dtubint

Re: 8606 for current and previous years

fanfare — Sat, 01 Feb 2025 21:29:18 GMT

The proper way to file Form 8606 is attached to Form 1040-X.
Form 8606 can be mailed by itself only when you are otherwise not required to file a tax return.

get Form 1040-X from IRS website and mail it in with your 8606, which you can also get in fillable PDF.

On Form 1040-X check the box for the year of the Form 8606 that you are submitting.
Note: when you are not changing any dollar amounts on your amending 1040-X, you can leave all the lines 1-23 EMPTY.

Part III explanation: "correct prior years Line 2 of Form 8606 ".

@dtubint

Re: 8606 for current and previous years

dtubint — Sat, 01 Feb 2025 21:21:01 GMT

It looks like I filed 8606 but always put the basis as 0 where I should have put it as the previous year contribution if I am not wrong. I put the contribution for that year as it is in all the years but the basis as always 0.

Re: 8606 for current and previous years

fanfare — Sat, 01 Feb 2025 21:33:34 GMT

Part III explanation: "correct prior years Line 2 of Form 8606 ".

It seems to me that doing this once only for the year of your most recently filed Form 8606 should be sufficient.

@dtubint

Re: 8606 for current and previous years

dtubint — Sat, 01 Feb 2025 23:49:38 GMT

Thanks @fanfare . So here is the thing

2020 - probably filed 8086 with 6k as contribution and basis as 0

2021. - filed 8606 with 6k as contribution and basis as 0

2022 - filed 8606 with 6k as contribution and basis as 0

2023 - didn't file 8606 but contributed 6.5k. I also did an amend due to an error of something else in this year.

2024 - in the process of filing now.

Based on this, please suggest the best possible path. What basis should I put in 2024 filing and how do I retrofit for the previous year basis ( where I put a 0) considering that I didn’t file 8606 for 2023. Also, is there a way to check if 8606 was file using the tax transcript? Thanks for your reply.

Re: 8606 for current and previous years

fanfare — Tue, 04 Feb 2025 03:44:24 GMT

to summarize the path forward:

amend your 2023 return by submitting 2023 Form 8606 (see above)

Line 1 6,500

Line 2 18,000

Line 3 24,500

Line 14 24,500

The assumption here is that no deduction was ever taken for any of these Traditional IRA contributions.

The submitted 2023 Form 8606 becomes your most recently filed Form when preparing 2024 tax return.

You didn't say if you are making a non-deductible contribution for 2024.

If no, 2024 Form 8606 is not needed.

Tax transcript for 2023:

irrelevant if you know the prior years basis needs correction.

@dtubint

Re: 8606 for current and previous years

dtubint — Sun, 02 Feb 2025 17:25:03 GMT

Thank you @fanfare . Yes I contributed in 2024 as well and therefore I should use 24500 as the basis for 2024, correct. And I should do this once I filed the 2023 amend.
I also read somewhere that we can directly send the 8086 form without needing to file and amend. Looking for more info into that.

I appreciate your inputs.

Re: 8606 for current and previous years

fanfare — Sun, 02 Feb 2025 21:42:53 GMT

Form 8606 can be mailed by itself only when you are otherwise not required to file a tax return.

It cost almost nothing to prepare the Form 1040-X (see above).

Without it, IRS has been known to return your Form 8606.

When done this way you sign 1040-X not 8606

@dtubint

Re: 8606 for current and previous years

dtubint — Mon, 03 Feb 2025 23:04:20 GMT

Thanks @fanfare . I am using TurboTax to file the amend and make changes to the "Traditional and Roth IRA Contributions" which I believe will generate the 8086 form and the 1040-X accordingly. I will confirm it once it is all filled out. I am going to give the description as below in the section where it says- Hope that is ok.

( Tell us why you're amending your return

The IRS will use this info to help process your amended return. )

Include 8606 from and correct prior years Line 2 of Form 8606

Re: 8606 for current and previous years

fanfare — Tue, 04 Feb 2025 03:46:39 GMT

You're using 2023 TurboTax, right?

Good Luck

Use the instructions above. ‎[02-01-2025 4:20 PM]. It's simpler.

Note: the IRS forms are available in fillable PDF format.

Re: 8606 for current and previous years

dtubint — Thu, 06 Feb 2025 23:47:23 GMT

Thanks @fanfare . I have efiled the amendmen t. Nit sure how long it will take to process. Can I go ahead and file 2024 now using the basis that was calculated in the amendment form or I should wait. Not sure how long it will take to process.

Re: 8606 for current and previous years

fanfare — Fri, 07 Feb 2025 02:20:22 GMT

Many forum posts have reported difficulty with prior year 1040-X e-File.

You are the exception that proves TurboTax will support this.

you can now proceed to file a correct 2024 tax return.

I recommend not e-Filing until end of February or later, but not too late in case you are REJECTED.

@dtubint