Filing form 8606 after submission

[brian-perrigino]

Hi.  I recently helped my daughter & son-in-law on their 2022 taxes and they filed 2 days ago.   We've since realized that they made a $6,000 contribution to a non-deductible IRA -- this information was not entered into TT thus form 8606 was not generated.   What makes this somewhat different than other questions that I've read on this subject is that the $6,000 contributed was immediately moved to a Roth IRA so taxes were paid when the conversion was done and the traditional IRA has a balance of $0.   Since they will not need to worry about the taxable basis of the traditional IRA years from now, do they need to be concerned that form 8606 wasn't filed?  If they do need to submit this, is it best to file the form separately and is there any way to avoid the $50 penalty that I've seen referenced.

Thanks,

Brian

[DanaB27 · Accepted solution]

Your daughter would need to file Form 8606 to show the conversion (assuming the contribution was made in 2022 for 2022 and the conversion happened in 2022). Also, you need Form 8606 to calculate the nontaxable part of the conversion since they made nondeductible traditional IRA contributions.

It seems it might be best to file an amendment. But please wait until your refund or payment is processed. Please be aware that you can e-file your 2022 amended federal tax return, but states may require amendments to be printed and filed by mail. Please see How to amend a tax return for instructions.

Please review the steps below for making nondeductible traditional IRA contributions and the conversion.

To enter the nondeductible contribution to the traditional IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the 1099-R conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "Continue"
6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[brian-perrigino]

Thank you @DanaB27 .  I just stepped through a copy (using TT Premiere) and think I have it.  I didn't totally understand the "recharacterized" but I answered "No" as advised.   When I was done, form 8606 was generated and the tax liability did not change.   I had already entered the 1099R data so think that is set.   Now I'll just wait a few weeks until the originals are processed and file the amended.  Looks like the Fed needs to be physically mailed ...all 56 pages!!!!.

Thanks again.

Brian

[brian-perrigino]

@DanaB27  Hello again.  One more quick follow up… will there be any needed to send an amended state (NY) return?  The numbers did not change and I don’t think 8606 is sent to NY so I’m thinking that is not necessary. 
Thanks again. 

[fanfare]

@brian-perrigino Your tax didn't change. I this is significant

look at your original Form 1040 Line 8 and schedule 1 line 20.

it should show $6,000.

of course the way Turbotax works you can't see that unless you printed copies of your original filing.

look at 1040-X now and it should show an AGI increase of $6,000 when you set non-deductible.

your original contribution was deducted, and cancelled out the Roth conversion.

There was no basis and there was no need for 8606 and no need to amend the tax return.

If it does not show this on line 8 or 1040-X line 1

then you did something wrong.

also by the way, if you e-Filed 1040, you can e-File your amendment  (when necessary) and avoid mailing.

i think you only get one e-File of 1040-X so don't waste it.

[fanfare]

[ never  mind]

@brian-perrigino 

[DanaB27]

Please verify your Form 8606. You should have the $6,000 basis on lines 1 and 3.  Assuming all traditional/SEP/SIMPLE IRAs were empty on December 31, 2022, lines 16 and 17 will have $6,000 and line 18 will be $0 (which will be carried over to line 4b on Form 1040). Line 14 should be $0. If this isn't the case then you might have to review your Form 1099-R entry and follow-up questions.

In regards to your NY state return please verify if there were changes on IT-201 line 9 taxable amount of IRA distributions. If your conversion was previously taxable on your federal return because you didn't show a basis (didn't enter nondeductible contribution) then this would have carried over to the NY state return (showing a taxable amount on line 9). But now that you entered the nondeductible contribution line should be $0.

@brian-perrigino 

[fanfare]

I was wrong your 1040-X AGI won't change and that is why your tax does not change.

The conversion and the deduction cancel each other out either way you do it.

you don't have to amend.@
@brian-perrigino 

[brian-perrigino]

@DanaB27 From 8606 shows $6,000 on lines 1, 3 and 14.  Lines 16, 17 & 18 are blank.  1040 line 4b shows 0.  If I try to edit line 16,  it opens the 1099-R but that form appears to be filled in correctly...

•  lines 1 & 2a show $6000
• line 2b taxable amount not determined and total distribution are both checked.
• line 7 has distribution code 2 and IRA/Simple are checked.

I went through the easy setup steps again for entering the traditional IRA but it did not update lines 16 & 17.  

Am I doing something wrong?   What do I need to do to get the amounts in line 16 & 17

Separately, NY line 9 shows 0 on both the original and amended so I guess that is OK.

[DanaB27]

It seems that you answered some of the follow-up questions incorrectly when you entered Form 1099-R for the conversion made in 2022. Please make sure you choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account" ($6,000) on the "What did you do with the money" screen.

Please review the conversion steps:

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@brian-perrigino 

[brian-perrigino]

@DanaB27 This worked.... thank you so much.   The difference was that I had checked "rolled over all the money" as opposed to "I did a combination..."   That allowed me to enter the $6000 for the Roth IRA line.   So I think I am done.

On filing, the instructions say to print and mail but the other person who responded said I could file one amended return.   Do you believe I can e-file it once the original return is processed... it looks like TT will allow this?   And I guess nothing to do for NY, right?

Thanks again.

Brian

[DanaB27]

Yes, that is correct you don't need to amend NY since there weren't any changes.

Yes, you can e-file your 2022 Form 1040-X. Please see Can I e-file my 1040X to amend my return? for details.

@brian-perrigino 

[fanfare]

If your original return shows you took the $6,000 IRA deduction and a $6000 conversion on 1040 Line 4b,

you don't have to amend, the tax is the same and the effect is the same as your

amended return with no $6,000 deduction and a no-tax IRA conversion (Line 4b = 0).

this is the only  legitimate way the tax can be unchanging.

If your original return does not look like that, then your original filing was incorrect and you definitely should amend.

@brian-perrigino 

[brian-perrigino]

@fanfareMy original return omitted the 2022 non-deductible IRA and it also recorded the 1099R as a regular rollover.  The net result was 0 taxes which was correct however an 8606 was not created which is why I am revisiting this.  Now, it shows the non-deductible IRA, the 8606 and the Roth rollover so I am good and it all matches the numbers as documented by @DanaB27 .  Now I'm just in wait mode to refile the federal return.   

Thanks for your help.