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Error In back door Roth by tax accountant

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  • Avatar jessikaur 
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    Status: Physician
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    Joined: 11/01/2017
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    So… I get a letter from the IRS saying I owe 4k in taxes due to my “retirement income that is taxable” as vanguard sent them in 1099R of 5500$ for both me and my spouse of 11K

     

    they are increasing my taxable income by 11K, therefore, saying I owe  4k in taxes…

    Now is as simple as my tax accountant didn’t fill out the 8606 form..

    OR did my tax accountant include the 11K as a deduction (even though I told her ten times it is a non-deductible IRA!!!!!!) and then the IRS is correct, and I do indeed owe them 4k as this 11k shouldn’t have been deducted.

    any help would be appreciated…

     

    Thanks!

     

     

     

    #157521 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 1997
    Joined: 03/01/2018

    So… I get a letter from the IRS saying I owe 4k in taxes due to my “retirement income that is taxable” as vanguard sent them in 1099R of 5500$ for both me and my spouse of 11K

     

    they are increasing my taxable income by 11K, therefore, saying I owe  4k in taxes…

    Now is as simple as my tax accountant didn’t fill out the 8606 form..

    OR did my tax accountant include the 11K as a deduction (even though I told her ten times it is a non-deductible IRA!!!!!!) and then the IRS is correct, and I do indeed owe them 4k as this 11k shouldn’t have been deducted.

    Click to expand…

    Of course you’re not really asking the forum what has happened because there is no way for us to know.

    Do you have a copy of your tax return? Was form 8606 completed for you and spouse? How about your form 1040, is line 15a 11,000 and line 15b 0?

    Let us know. The mistake may in fact be on the part of the IRS. These CP2000 notices are quite common.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #157532 Reply
    Liked by jfoxcpacfp, Peds
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3787
    Joined: 01/08/2016

    Did you look at your tax return…..

    #157534 Reply
    Avatar Tabaxus 
    Participant
    Status: Attorney
    Posts: 103
    Joined: 01/15/2018

    Was it for 2016?  A lot of people (myself included) have gotten these notices from the IRS for 2016.  The notice could well be flat-out wrong.  I had to burn an hour of my time (and money on a fax) to deal with it, but they dropped the issue.  Really freaking obnoxious.

    #157573 Reply
    Avatar jessikaur 
    Participant
    Status: Physician
    Posts: 90
    Joined: 11/01/2017

    Yes it was for 2016!!! That’s why I asked the question in case anyone else was having the same issue, what was the problem with yours?

    #157586 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3787
    Joined: 01/08/2016
    what was the problem with yours?

    Click to expand…

    i didnt have a problem, you still havent said what yours was….?

    #157622 Reply
    DMFA DMFA 
    Moderator
    Status: Physician
    Posts: 2126
    Joined: 06/24/2016
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    Check your 1040, and check your whole return to see if you filed 8606.

    If it has an IRA deduction, you’ll need a 1040X and an 8606 for the year(s) in question.

    If not, then the IRS just needs to be told that the IRA distribution (Roth conversion) was of non-deductible basis, and you only need to file an 8606 for the year(s) in question.

    Step 1 is checking your return…so obtain that, and keep us updated.

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #157628 Reply
    Avatar jessikaur 
    Participant
    Status: Physician
    Posts: 90
    Joined: 11/01/2017

    I’m still not sure.. but sending in the 8606 again to see what they say. sending today.

    #159252 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 1997
    Joined: 03/01/2018

    I’m still not sure.. but sending in the 8606 again to see what they say. sending today.

    Click to expand…

    how is it that you’re not sure?

    1) did you claim a tax deduction for IRA contributions for yourself and spouse in 2016?

    2) did you file form 8606 for each of you with your 2016 return? if so was it completed accurately?

    you should know the answers to these questions, definitively

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #159269 Reply
    PhysicianOnFIRE PhysicianOnFIRE 
    Moderator
    Status: Physician
    Posts: 1516
    Joined: 01/08/2016

    See what I mean about it not necessarily being worthwhile to do the Backdoor Roth?

    Hopefully, everything was done correctly and this can be laid to rest. If not, you may have to amend the return, but you should not be forced to pay taxes on money that was already subject to income tax.

    Good luck!
    -PoF

    40-something anesthesiologist and personal finance blogger @ https://physicianonfire.com [Part of the WCI Network] Find me on Twitter: @physicianonfire

    FIRE. Financial Independence. Retire Early.

    #159295 Reply
    Liked by Caligas
    Avatar Caligas 
    Participant
    Status: Physician
    Posts: 66
    Joined: 12/19/2017

    And make sure you explain to IRS that you are doing a “backdoor roth”

    I kid.

    #159385 Reply
    Avatar Caligas 
    Participant
    Status: Physician
    Posts: 66
    Joined: 12/19/2017

    Suggestion: see if this can be resolved by getting an agent on the phone. Explain that you made a non deductible ira contribution and later converted to roth, and that no tax should be due. Might work.

    #159393 Reply

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