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2007 trad IRA contribution, 2010 roth IRA conversion, no form 8606

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  • 2007 trad IRA contribution, 2010 roth IRA conversion, no form 8606

    Hi all,

    Just a quick background:

    1. contributed $4,000 to a traditional IRA in 2007. No form 8606 filed.

    2. converted $4103.35 to a Roth IRA in 2010. No form 8606 filed.

    3. I want to send in form 8606 from 2007 and 2010. I believe I have them filled out correctly, everything makes sense to me. From form 8606 in 2010, I have to pay 103.35 in taxes in the tax year 2010. I see that IRS will accept forms 8606 without an amended 1040.

     

    Question: Can i just send in the form 8606 without sending in form 1040 even though i technically owe 103.35 in taxes? Or should I just send in the form 8606 in 2007 and 2010 and see how the IRS responds?

    edit: 2nd question: should i be including a cover letter explaining the situation?

     

    thanks!

  • #2


    Question: Can i just send in the form 8606 without sending in form 1040 even though i technically owe 103.35 in taxes? Or should I just send in the form 8606 in 2007 and 2010 and see how the IRS responds? edit: 2nd question: should i be including a cover letter explaining the situation?
    Click to expand...


    Yes, you can send in the 8606 as a standalone form. Technically, you also owe penalty and interest. You have 2 choices:

    • Send them together with a cover letter of explanation and ask the IRS to calculate the balance due.

    • File the 2007 as a standalone with cover letter and the amended 1040 for 2010 paying taxes due only, then wait to see if the IRS bills you for the penalty and interest.

    Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

    Comment


    • #3
      There is nothing you need to do if you claimed a deduction for the 2007 traditional IRA contribution and you had NO non-deductible basis from 2007 thru 2010. This is way past the Statute of Limitations (SOL). This is normally three years after the tax filing deadline for 2010.

      If you did have non-deductible basis during this period. You would only want to file Form 8606 to correct the IRS record of that basis. If you would need to amend your tax returns still subject to the SOL or to correct the non-deductible basis moving forward.

      Comment


      • #4




        There is nothing you need to do if you claimed a deduction for the 2007 traditional IRA contribution and you had NO non-deductible basis from 2007 thru 2010. This is way past the Statute of Limitations (SOL). This is normally three years after the tax filing deadline for 2010.

        If you did have non-deductible basis during this period. You would only want to file Form 8606 to correct the IRS record of that basis. If you would need to amend your tax returns still subject to the SOL or to correct the non-deductible basis moving forward.
        Click to expand...


        I believe OP was stating the TIRA for 2007 was nondeductible and is the account s/he converted in 2010 including the growth of $103.35. I assumed that, given there is no SOL on the 8606 any longer, the gains would be taxable. I see what you're saying, though - it's the 1040 that is beyond the SOL, and, thus, no taxable income to report, right?
        Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

        Comment


        • #5
          really need to sort back through prior tax returns and know for certain what happened, whether 2007 contribution was deducted or not, whether 2010 conversion was taxed fully or partially or not at all.

          also, are 2007 and 2010 the only years you did anything with any IRAs?
          my radiology group is hiring, pm if you can do msk and are interested

          Comment


          • #6
            thanks for the replies.

            $4000 in 2007 was non-deductible into a traditional IRA.

            2010 conversion from traditional to roth IRA was not taxed at all. i didn’t know what i was fully doing at the time. the IRS sent me a letter saying I owed taxes on the full $4103.35 which came out to be about $1000+. I sent them back a letter saying it was a rollover from traditional to roth IRA stating I owed them 0 dollars, which i know is not true anymore.

            I haven’t done anything with IRAs except those stated above til present time. I just wanted to get all of this sorted out before i start doing backdoor roth IRA moving forward.

            Comment


            • #7


              the IRS sent me a letter saying I owed taxes on the full $4103.35 which came out to be about $1000+. I sent them back a letter saying it was a rollover from traditional to roth IRA stating I owed them 0 dollars, which i know is not true anymore.
              Click to expand...


              When did the IRS send that letter? Did you receive a response to your letter?
              Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

              Comment


              • #8
                I received the letter in 2012 and did not receive a response

                Comment


                • #9




                  I received the letter in 2012 and did not receive a response
                  Click to expand...


                  Given that your response provided incorrect information, you may or may not be subject to the SOL, I do not know. I'd just provide the 8606 with cover letter and see what happens. I have a feeling it will be nothing, but it's not enough to worry about, impo.
                  Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

                  Comment


                  • #10
                    Thanks. I’ll give it a shot. both the 2007 and 2010 form 8606 ya?

                    Comment


                    • #11




                      Thanks. I’ll give it a shot. both the 2007 and 2010 form 8606 ya?
                      Click to expand...


                      Yes
                      Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

                      Comment


                      • #12
                        There are only two ways the SOL would be extended in these circumstances:

                        • Up to six (6) years if the tax liability from the error exceeds 25% of your previous tax liability for the year.

                        • Up to seven (7) years in the cause of intentional fraud.


                        Neither is true in these circumstances, but the SOL on collections is ten (10) years.

                        Usually, the IRS would reply to a response letter after sending a notice of tax due or send followup collection notices. However, it is possible that the IRS simply closed the case. The IRS has for decades generally not taken enforcement actions with de minimis tax liabilities (< $100 - $200), let alone taxable income in that range.

                        This is not tax advice, but personally I would not do anything. If the IRS had wanted to collect the tax on the $103.55, they would have followed up years ago. At most this would be the tax liability on $103.55 and interest. You will probably be costing the IRS more than this amount by reactivating this case.

                        Comment


                        • #13
                          Hmm good points. But how do I go about establishing basis so I can move forward with a paper trail? I would like to continue this year with backdoor roth IRA.

                          Don’t I need to have all my ducks in a row with form 8606 so when I actually retire many years from now the IRS knows that the money in the roth IRA is legitimate and i don’t need to be taxed on it once distribution starts?

                          Comment


                          • #14
                            The basis was not reported for 2007 and it was not reconciled in 2010. Only if you had non-deductible basis and/or pre-tax balances in all traditional, SEP and SIMPLE IRA accounts as of 12/31/2006 would you have to file a Form 8606 for 2007 - 2010.

                            There is no obligation to file an amended return for 2010 or raise any taxation issue with the IRS.

                            Comment


                            • #15
                              your tIRA is zero, there is no basis

                              if you had experienced losses in the tIRA and converted an amount less than the contribution, then you would have had carry forward basis in the tIRA and maybe you'd want to redo the 8606s to reflect that (I would not)

                              but in this case there is no basis and everything is in the Roth
                              my radiology group is hiring, pm if you can do msk and are interested

                              Comment

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