8606's not filed

[snowshoe]

I have a longtime client that has inquired aout 8606's filed in prior years. They don't exist. He has not begun getting those $ from the IRAs (non deductable traditional)- but wishes to possibly in the next year or 2.

He's sure he gave me everything rcvd from broker & I maintain that I would not have ignored that info (and included everything else).

Do I need to do 1040X or what is the best way to proceed? Any issues you can think of?

[David1980]

Were the 8606's filed in the year in which the non-deductible contribution was made? Those are the only years that matter.

[joanmcq]

Once you've made nondeductible contributions you need to file each year, don't you?

You can file the back 8606's on their own. Notice the form has a place to send in apart from a tax return. No need to do 1040x's. Look at the instructions for the form.

[ChEAr$]

Once you've made nondeductible contributions you need to file each year, don't you?

You can file the back 8606's on their own. Notice the form has a place to send in apart from a tax return. No need to do 1040x's. Look at the instructions for the form.

and instructions say something about $50 penalty for not filing form(s).

However, based on a current discussion on another national professional board, nobody has every heard of IRS actually actually imposing said penalty.

True, the 8606 is a standalone form. One confederate said he had prepared a bunch of them for different years , sent them under a cover letter and never heard any more about them except a brief note acknowledging receipt of them.

[David1980]

Once you've made nondeductible contributions you need to file each year, don't you?

You don't.

Who Must File

File Form 8606 if any of the following apply.

You made nondeductible contributions to a traditional IRA for 2010, including a repayment of a qualified reservist distribution.

You received distributions from a traditional, SEP, or SIMPLE IRA in 2010 and your basis in traditional IRAs is more than zero. For this purpose, a distribution does not include a rollover, qualified charitable distribution (including a qualified charitable distribution made in January 2011, that you elect to treat as made in 2010), one-time distribution to fund an HSA, conversion, recharacterization, or return of certain contributions.

You converted an amount from a traditional, SEP, or SIMPLE IRA to a Roth IRA in 2010 (unless you recharacterized the entire conversion—see page 3).

You rolled over an amount from a qualified retirement plan (other than a designated Roth account) to a Roth IRA in 2010 (unless you recharacterized the entire rollover—see page 3).

You received distributions from a Roth IRA in 2010 (other than a rollover, recharacterization, or return of certain contributions—see page 7).

You rolled over an amount from your 401(k) or 403(b) plan to a designated Roth account within the same plan (in-plan Roth rollover) after September 27, 2010. See the instructions for Part III on page 7.

You received a distribution from your designated Roth account after September 27, 2010, that is allocable to an in-plan Roth rollover (only if the in-plan Roth rollover is included in income in 2011 and 2012). See the instructions for Part IV on page 7.

You made a repayment of a qualified disaster recovery assistance, or qualified recovery assistance distribution that is attributable to previously nondeductible contributions.

You received a distribution from an inherited Roth IRA that was not a qualified distribution or from an inherited traditional IRA that has basis or you rolled over an inherited plan account to a Roth IRA.

Simply having made a non-deductible contribution in some prior year does not require you to file 8606 for the current year. That said, it is nice to print an 8606 each year for the taxpayer so that they don't lose track of their basis.

[snowshoe]

Thank you for your thoughtful replies. I HAD not read the instructions for th 8606, but have it printed here now. I was looking for direction & past experiences & hope you don't feel robbed of your time by answerin me before I did alot of research.

There was only 1 8606 done in the previous 5 years- though he's been contributing for eons. His broker at EJ has him convinced that he's going to be totally screwed when he begins taking distributions in 2012. And he seems a bit ticked at me. He didn't give me the info regarding the contributions- but I feel that I failed him by not inquiring about that. So, even after the fact, I'd like to satisfy him on this issue. I thought w could deal with it this spring- but he wants it done IMMEDIATELY.

[veritas]

This is another reason

we use organizers for every client every year.

[FEDUKE404]

Also

Most software will track from year to year any relevant Form 8606 numbers.

Of course, for a new client a bit of due diligence is obviously necessary.

As for the guy getting "screwed," the worst that can happen is that all of his distribution is subject to federal income taxes.

When given the opportunity, I generally advise (within my knowledge base) that a client should perhaps NOT make any non-deductible regular IRA contributions and instead use any of several other methods.

FE