Form 8606

[BigBob0923]

I filed my 2022 taxes, I accidently selected "No, I did not make and track nondeductible contributions to my IRA." My AGI is over $200k and I have a employer-sponsored 401k so I'm not looking for deductions. However, I should have selected "Yes" because I was making contributions from my bank account to the IRA. I changed the selection in my 2022 taxes but nothing changed. Is there any visible difference in my filing for 2022 that makes it worth it for me to file a 1040X?

[ThomasM125]

The question is asked in part to help determine if any distributions you took from the retirement plan are not taxable. If you made non-deductible contributions to your retirement account, a portion of your distributions would not be taxable. If you took no distributions during the year, then you don't need to do an amended return.

You should complete form 8606 to report and track non-deductible contributions. It is not necessary to amend your 2022 return since you report your basis, or your non-deductible contributions amount,  in your IRA each year that you submit the form 8606. So as long as you complete that entry correctly in the current year on Form 8606 you will be in compliance.

[Edited 1/30/24 at 10:51AM PST] @BigBob0923

[Opus 17]

Yes, you must amend your 2022 return.

If you make non-deductible contributions to an IRA, it is your responsibility to file form 8606 to keep track of your basis (after-tax contributions) in the IRA.  You should keep copies of form 8606 for your entire life, this is an important exception to the rule that you can discard tax paperwork after 3 or 7 years.  The first year you make non-deductible contributions, you create a form 8606 to track your basis.  Any year in the future when you make more non-deductible contributions, you use the information from the old form 8606 plus the current year info to make a new form 8606 that tracks your cumulative after-tax basis.  And so on and so on.

When you withdraw your retirement funds, a percentage will be tax-free since you paid tax on the contributions, but only if you tracked the non-deductible contributions and can prove it.  The IRS will not track them for you, and the IRS does not have to allow any part of your IRA withdrawal to be tax-free unless you can prove you made non-deductible contributions and properly reported them.  That's why you keep copies of all your 8606s forever.

You also need form 8606 to determine the non-taxable portion of any Roth IRA conversion, if you ever do that.

Amending your 2022 return will not change your tax owed, but will create form 8606 to document the non-deductible contributions.  You can, if you want, prepare the forms by hand instead of using a tax program–you need form 8606 showing the contributions,  and a form 1040-X showing no overall changes. Make sure you download the correct form 8606 for 2022, and check the amended box at the top.  Or, use a tax program to prepare it for you. 

[BigBob0923]

Form 8606 was filed for 2022 return. 

[Opus 17]

@BigBob0923 

Thats fine then.  It sounds like you started without the form, changed your answer and added the form, but your tax or refund didn’t change.  That’s normal as I explained.

For 2023 and forward, you will only have a new form 8606 if you make more non-deductible contributions, or you take a withdrawal, or you do a conversion to a Roth IRA.  But keep your 2022 form 8606 with your other important tax papers basically forever, because you will need it eventually.  

[BigBob0923]

Thanks. I should have been more clear about the order of operations. I did put in that I contributed $1200 in 2022 return, but when TT asked me if tracked the contributions I said no. It doesn’t look like answering yes would have changed my refund or any of the documents so I don’t need to refuse. 

[dmertz · Accepted solution]

When 2022 TurboTax asked if you made nondeductible contributions, TurboTax was asking about nondeductible traditional IRA contributions made for year prior to 2022, not the contributions made for 2022.  In other words, TurboTax is asking if you had any amount to carry forward from line 14 of the most recently filed  Form 8606 for some year prior to 2022.  If you made no nondeductible traditional IRA contributions for 2021 and earlier, you were correct to answer No.

[BigBob0923]

Awesome. Thanks!