IRA

[GV96]

What should I do if I've been filing my Roth IRA as a Traditional IRA.  How do I fix it?

[Mike9241]

you can convert your IRA to a Roth IRA by simply telling your bank or other financial institution that you want to do so. You can keep your funds at the same financial institution. You can even keep them in the same investments. All you're doing is changing the type of account that holds them. The trickier part is figuring out the tax cost of converting to a Roth. When you convert your traditional IRA to a Roth, two things happen. The government taxes the current value of the funds you convert, and those funds now become your basis in a Roth. The first step is to figure out your Roth conversion income. If you're converting deductible IRA funds, you'd report as income the current value of the funds on the day you make the conversion. Your basis in a deductible IRA is zero because you received a tax deduction for your savings contributions.

If you're converting nondeductible IRA funds, report as income the current value of the funds on the day you convert, less your basis. 

[ErnieS0 · Accepted solution]

You should fix it. You can file amended returns if you claimed a deduction for IRA contributions. You will owe tax.

If your income was too high to claim a traditional IRA deduction then you will just have to amend your Form 8606s to show the amounts are Roth contributions.

See how to amend form 8606

[GV96]

Thank you for your advice.  Also, I've made this mistake for over 5 years.  Every year that I did my taxes, I just went by the previous year.  It wasn't until now that I realized this big mistake.  How far can I go back to fix this?

[fanfare]

you have to amend all five years one at a time and pay the tax on the IRA deduction that you will be removing.

you can't deduct a contribution to a Roth.

@GV96 

[GV96]

My IRA is a already a ROTH IRA but I've been noting it on my taxes as a TRADITIONAL IRA.  I'm not sure what to do now to fix it.  How far back do or can I go to fix it?

[GV96]

By amend you mean to "redo" my taxes as a whole with the IRA change?  Do I have to amend all my taxes starting from the year I opened up my IRA?

[fanfare]

you have to amend any tax year for which you took an IRA deduction for your Roth contribution.

It's pretty simple, your AGI just goes up by that amount.

@GV96 

[fanfare]

the current Form 1040-X will work for 2019 and later.

for earlier years you have to get the 1040-X for that year

i.e 2017 Form 1040-X for tax year 2017, etc.

all the older forms are on the IRS website.

[fanfare]

when filing 1040-X, do not include your old 1040 nor your revised 1040 because the Form 1040-X reflects any changes there and becomes your new tax return.

your AGI is on 1040-X Line 1.

you have to refigure your tax.

[Ed golf]

Our income consists of social security, a pension, dividends and some stock gains. In the case of the latter, I sold some stocks last yrfor some sizable gains and wanted to offset that someway. Turbotax won't let retake credit for any IRA'ss. that correct? 

[MayaD]

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan. However, If you didn't have any earned income, you can't contribute to either a traditional or a Roth IRA. 

Income derived from investments would not be considered earned income.

Compensation for purposes of contributing to an IRA doesn't include earnings and profits from property, such as rental income, interest and dividend income, or any amount received as pension or annuity income, or as deferred compensation.

For more information please check: IRS.gov