topic Re: Form 8606 in Retirement tax questions

Form 8606

VinHer54 — Fri, 21 Aug 2020 15:46:53 GMT

I made after-tax contributions to my IRA for 7 years. My old accountant did not file Form 8606 with my Federal taxes. I understand the form can be filed retroactively. Can TurboTax prepare these forms for me for a fee? If so, approximately how much would it cost?

Thank you,

Vincent J. Herman

Re: Form 8606

macuser_22 — Fri, 21 Aug 2020 16:08:03 GMT

No. They can only be filled out manually. Note, the there is a $50 penalty for each missed 8606. The IRS can waive the penalty if you provide a reasonable explanation and request a waiver on a letter included with the forms when you mail them.

Each 8606 must be for that tax year.

You can download past years 8606 forms and instructions from the IRS site here:

https://apps.irs.gov/app/picklist/list/priorFormPublication.html;jsessionid=VSgFhrqjzhfgZaqMRe5gdexs.21?value=8606&criteria=formNumber&submitSearch=Find

Mail: https://www.irs.gov/filing/where-to-file-addresses-for-taxpayers-and-tax-professionals-filing-form-1040

Re: Form 8606

cfauver — Thu, 17 Mar 2022 14:44:44 GMT

I failed to file Form 8606 for a few of the past years including 2020. Is the $50 penalty due for every year, even as recent as 2020 or only 3+ tax years, eg 2018 and before?

And does the IRS require that the penalty check be included when mailing the forgotten Form 8606 forms?

Lastly, can you confirm the address to mail the Form 8606 is the same address I use for mailing my 1040?

Re: Form 8606

JohnW152 — Thu, 17 Mar 2022 16:02:04 GMT

The $50 penalty is due for each tax year in which you’re required to file Form 8606 to report a nondeductible contribution to a traditional IRA, but fail to do so, unless you can show reasonable cause.

The IRS’ 2021 Instructions for Form 8606 aren’t clear that the penalty should be included, but you could most likely include them without worry. I’d suggest submitting a separate check for each tax year, writing “Form 8606 for Tax Year (enter the appropriate tax year)” in the memo portion of each check.

You’ll need to sign Form 8606, and send it to the IRS at the same place you would otherwise file Form 1040, 1040-SR, or 1040-NR. You can see that address in the Where Do You File? section on the last page of the 2021 Instruction 1040.

@cfauver

Re: Form 8606

macuser_22 — Thu, 17 Mar 2022 16:15:35 GMT

@cfauver wrote:

I failed to file Form 8606 for a few of the past years including 2020. Is the $50 penalty due for every year, even as recent as 2020 or only 3+ tax years, eg 2018 and before?

And does the IRS require that the penalty check be included when mailing the forgotten Form 8606 forms?

Lastly, can you confirm the address to mail the Form 8606 is the same address I use for mailing my 1040?

You need to mail th IRS the missing 8606 form for each year that was missed. You only need to file a 8606 if the basis changed because of a new non-deductible contribution or you had an IRA distribution, otherwise the last filed 8606 remains in effect.

I do NOT recommend including the $50 penalty, instead include a letter explaining the reason for the missed 8606 forms and ask that the penalty be waived. It would be very unusual for the penalty not being waived but if they don't then they will bill you. Once you pay it is nearly impossible to get your money back even if they do waive the penalty.

Prior year 8606 forms can be found here:

https://apps.irs.gov/app/picklist/list/priorFormPublication.html

Re: Form 8606

VinHer54 — Wed, 23 Mar 2022 15:25:45 GMT

Here’s a related question: from what I’ve read, if you fail to file a form 8606 for previous year(s) you can ask the IRS to approve the form(s) retroactively. They will charge a fee of $50 per year missed, which I really have no problem paying. I was told that unless and until the IRS approves the retroactive 8606, one should not claim any after-tax contributions. I have contributed a substantial amount in after-tax money to an IRA over the years. No 8606s were filed. Recently I have moved funds from my IRA to my ROTH IRA. I should not have to pay income taxes on 100% of the amount I moved from the IRA to the ROTH IRA. But I don’t want to claim this deduction with a written approval of the form 8606s. IRA simply does not respond and I don’t know what to do. Any advice? Thanks.

Re: Form 8606

fanfare — Wed, 23 Mar 2022 15:31:55 GMT

File a correct 2021 tax return with your true prior years basis if applicable.

Depending on your actions in 2021 Form 8606 may not be needed in 2021.

If you did a Roth conversion in 2021 you need to file Form 8606.

Sending in missing Form 8606 from the past is a separate matter.

Re: Form 8606

fanfare — Wed, 23 Mar 2022 15:41:04 GMT

@VinHer54

"I should not have to pay income taxes on 100% of the amount I moved from the IRA to the ROTH IRA."

This is not possible.

The taxable portion is calculated on Form 8606.

That's why it is so important.