Non Deductible IRA Contributioms (8606)

[taxprepny99]

Hello TT team, 

In 2021, I rolled over an IRA savings (no contributions/withdrawals were made during this time over at Capital One. It was a personal account  It was rolled over into a Fidelity tIRA account in the amount of $7,500. I've been ineligible to deduct the IRA contributions because of my income. I've used the TT software which included the form 8606 every year since 2021. Line 14 on this form asks to enter your total basis for the year and earlier years. Does the mean all of the contributions since the first non deductible has to be added on this line? Here are my total contributions.: 2021($6,000), 2022 ($6,000), 2023 ($6,500).  Do you also have to include the rollover amount? Much appreciated for your help. 

[Mike9241]

total basis is the total of all nondeductible contributions made for all years (line 1 of every form 8606). rollover has nothing to do with tax basis. 

[taxprepny99]

Hi @Mike9241, looking at current form 8606 line 1 is only asking to enter nondeductible contributions to tIRAs for 2023 including those made from January 1, 2024 - April 15, 2024 not previous years. 

Are you referring to line 2 that asks about entering total basis in tIRAs rather than line 1? 

Line 14 is the total basis in tIRA for 2023 and earlier years. 

TT software did not include the total basis of my previous years contributions but did include form 8606. 

I find it strange that TT did not include my previous years non deductible contributions when form 8606 was included on the return for those years.  

[taxprepny99]

Can anyone please confirm my response about total basis on line 2 and whether I need to include all previous years of non deductible contributions? 

[DanaB27]

Yes, if you never withdrew any funds or converted them, then your line 2 basis will be the sum of all previous years of nondeductible contributions. This should match your last filed Form 8606 line 14.

If you made any withdraws/conversions then you will need to look at your last filed Form 8606 line 14 to see the basis.

Please see Line 2 instructions for additional information.

[taxprepny99]

Hi @DanaB27 ,

Sorry for the long winded response.

I used TT software for filing and 2021 for my first year filing for an 8606 form and line 1 was $6,000 which I maximized the contribution for that year. Line 2 was zero, line 3 was $6,000 (adding lines 1+2) and line 14 was $6,000.

The following year in 2022, I again maximized my contribution to $6,000. Line 1 - $6,000, Line 2 is 0 and line 14 - $6,000 (total basis for all previous years). I think Line 2 should have included $6000? with line 3 and 14 being $12,000

I just noticed for my 2023 year form 8606, line 1 is $6,500 (which is what I contributed for the year), line 2 is $6,000 and line 3 is $6,500 and line 14 is 12,500.

Shouldn't line 2 in year 2023  be $12,000 for total basis since I contributed $6,000 for both years 2021 and 2022 and line 14 be $18,500?

Thank you!

[DanaB27]

Yes, Line 2 on your 2022 Form 8606 should have included $6000. Then lines 3 and 14 should have been $12,000.

Yes, line 2 on your 2023 Form 8606 should be $12,000 and line 14 should be $18,500.

You will have to file a corrected 2022 Form 8606.

On your 2023 tax return make sure that you enter the corrected prior basis ($12,000) during the interview when TurboTax asks if you tracked any nondeductible contributions (steps 8 and 9)

1. Click “Deductions &Credits” on the top
2. Click "I'll choose what to work on"
3. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
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 nondeductible contributions before this tax year
9. Enter your basis in the Traditional IRA from your 2022 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).

[taxprepny99]

Hi @DanaB27 . Thank you for your explanation. Can I file a corrected 2022 Tax form 8606 with the guidance (step by step) you provided below for the 2023 tax return in Turbo Tax?

[DanaB27]

Yes, you can amend your 2022 tax return and use the instructions to correct your 2022 Form 8606:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed ($6,000)
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” since you had nondeductible contributions before this tax year
10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 ($6,000)
11. 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).

[taxprepny99]

Hi @DanaB27 , thank you for clarifying. I made the changes in my 2022 TT desktop version for this form 8606. I reviewed your link how to amend your 2022 tax return. I'm in the software but do not see an option to file an amended return. Or do I need file an amendment in the 2023 version? Also if I file an amendment for federal will it automatically do it for state as well? Thank you.

[DanaB27]

No, if you amend a 2022 tax return you will need to use the 2022 version. 

When open the TurboTax version 2022 you should see at the bottom left the option to start an amended return. You can select to only amend to federal return.

You stated that you made already changes to the 2022 Form 8606, do you mean you changed the original return? Generally, you should not just make changes to a file return without selecting amend. 

If you made already changes to the original return then you can print out the corrected 2022 Form 8606 and mail it to the IRS.  Be sure to include your address on page 1 of the form and your signature and the date on page 2 of the form. 

[taxprepny99]

Hi @DanaB27 . Thank you. I now see the amended return option. I made the changes only within the amended return for 2022. Can I just mail the updated 2022 Form 8606 with an explanation or do I need to mail the entire amended federal tax return for 2022 return?

[DianeW777]

Yes you can file Form 8606 alone.  Be sure to add the address and sign it as instructed. Use the link below to find the mailing address for your state.

• If you aren’t required to file an income tax return but are required to file Form 8606, sign Form 8606 and send it to the IRS at the same time and place you would otherwise file Form 1040, 1040-SR, or 1040-NR. Be sure to include your address on page 1 of the form and your signature and the date on page 2 of the form.
• Where to file paper returns with IRS

@taxprepny99 

[taxprepny99]

Thank you I was able to document the proper address for IRS filing based on my state. I am required to file an income tax return. Would I need to send the updated form 8606 to my state as well?

[taxprepny99]

Can I include the 2022 form 8606 somehow and attach it with my 2023 tax return? I did include an explanation on the 2023 form 8606, it just would be nice to include that form. Just a thought. Thank you again for your patience and support!