Form 8606, Nondeductible - How to make work?

Forum|Forum|4 years ago
March 10, 2022
2 replies
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I have a personal traditional IRA with nondeductible basis - below the age to require RMD's - no contributions in 2021, no distributions.

I have an Inherited IRA with NO nondeductible basis - from 2005, non-spouse, multiple beneficiaries - Must take RMD's from this Inherited IRA, have done so and have entered 1099-R.

Form 8606 is not automatically being generated. Why? It worked last tax year.

Further and possibly related, when entering 1099-R - the question about 12/31/2021 year end "value" of IRA's never came up (as in past years). I found the worksheet and entered the value - which gets carried into Form 8606. And last years nondeductible basis is shown.

I found the Community question - "Where do I find Form 8606?" marked solved 6 days ago.

As written in the response, none of the exceptions apply. The closest is the first -"You received a distribution from an inherited traditional IRA that had nondeductible contributions" - BUT my inherited IRA has NO nondeductible. So, based on that response, Form 8606 should be auto generated. It is not.

In the answer to "Where do I find Form 8606?" - below the exceptions, there is a section, how to trigger Form 8606 - I have answered "YES" to.... "When you reach the screen Any nondeductible contributions to your IRA? answer Yes, then continue. We'll generate and fill out the 8606 behind the scenes."

But no Form 8606.

I spent nearly 5 hours on the phone with a "tax expert" (Sat, 5 Mar) (today 10 Mar). The end result seemed to be I had to wait for an update scheduled for 31 Mar. Yet today, I found a "Federal Individual Forms Avalability" list (PC Windows download) which shows "Form 8606, Nondeductible" as "available" for both Print and E-File. And as of today, still cannot get Form 8606.

I've tried to use "Forms" - "Open Forms" - Form 8606 -- I can not directly complete- it will not accept numbers.

What is my path forward? How do I get Form 8606 auto generated? Is there an update scheduled?

Best answer by fanfare

"I have an Inherited IRA with NO nondeductible basis "

You must understand, Inherited IRAs and your own IRAs must be treated completely separately.

If you had a basis in the Inherited IRA and you took money from your own IRA with basis or made a non-deductible contribution to your own IRA,

you would have to file two separate 8606 forms.

Since the only activity was in the IRA with no basis, Form 8606 is not filed.

fanfare

Level 15

8606 if not filed if you did not do anything.

ie no distribution conversion nor contribution that you want to be non-deductible.

Always retain a paper copy of the last one you filed which might be a long time ago.

MNOPAuthor

Level 2

I appreciate the reply, but I'm not sure I see how your response helps me. It is my understanding that Form 8606 represents a summary of all traditional IRA activity. Between, my two IRA's, there was a withdrawal (from inherited IRA) and there is nondeductible basis (from my traditional IRA, but no actual 2021 contribution) so, in total between the two, I'm thinking that the withdrawal has to be reduced since it has basis in it. This is the way it has worked for the last couple of years. Why the change for tax year 2021? In a fast peruse of Form 8606 instructions, I did not see anything that would suggest a change in approach. So why won't TTX generate F8606 automatically like in prior years? I'm confused and frustrated.

fanfareAnswer

Level 15

"I have an Inherited IRA with NO nondeductible basis "

You must understand, Inherited IRAs and your own IRAs must be treated completely separately.

If you had a basis in the Inherited IRA and you took money from your own IRA with basis or made a non-deductible contribution to your own IRA,

you would have to file two separate 8606 forms.

Since the only activity was in the IRA with no basis, Form 8606 is not filed.

Still_Another_Bob

Level 2

I, too, had what sounds like the same problem you and a few others have had: Distributions from a traditional IRA to which we have made non-deductible contributions in the past, but no contributions in the past few years since we retired (and none in 2021), and for which we have been filing Forms 8606 each year since we made the non-deductible contributions. No problems in past years when we have been filing our taxes, but this year TurboTax did not prompt for the 2021 year-end fair market value or basis for prior year. I, too, spent several hours on the phone with two different support people trying everything we can think of to force TurboTax to ask for these two pieces of information, but with no luck.

I noticed your comment about being told to wait for a software update scheduled for March 31. Since for me it was now March 31, 2022, I decided to give TurboTax one more try. I deleted all of the "Wages" information (1099-INTs, 1099-Rs, 1099-DIVs, etc) and re-entered it. This time TurboTax did prompt me for the fair market value and basis and the associated Form 8606 now looks reasonable. (I still need to check the entire return before I'll pronounce it "correct.")

Was there truly a software update on March 31? Or did I just happen to clear something else out that was causing the problem when I deleted all of the "Wages" information? I guess we'll never know. Anyway, have you tried it again? Maybe it will work now.