Can a Traditional IRA be deducted on an amended return?

[dyne]

Can I allow a deduction for a TRADITIONAL IRA contribution on an AMENDED TAX
Return? I think so. The taxpayer filed the original return married filing SEPERATELY
where it was MUCH to their advantage to file jointly. It is clear that she WANTED the
IRA to be a traditional deductible IRA but she used software which converted the IRA
to a non-dedutible IRA because her income was too high. I contend that she DESIRED
for the IRA to be a traditional IRA so it WILL be deductible on an amended return which
converts the two seperate returns for her and her husband to one JOINT return.

[FEDUKE404]

Question is deductible aspect

Can I allow a deduction for a TRADITIONAL IRA contribution on an AMENDED TAX
Return? I think so. The taxpayer filed the original return married filing SEPERATELY
where it was MUCH to their advantage to file jointly. It is clear that she WANTED the
IRA to be a traditional deductible IRA but she used software which converted the IRA
to a non-dedutible IRA because her income was too high. I contend that she DESIRED
for the IRA to be a traditional IRA so it WILL be deductible on an amended return which
converts the two seperate returns for her and her husband to one JOINT return.

I don't quite follow your logic, especially the "software which converted" statement. The traditional IRA is still a traditional IRA, the only difference being if non-deductible funds were placed into the account then you have a "forever" problem with the basis adjustments whenever taxable withdrawals are eventually made.

Whether filing jointly or separately, the rules for whether either spouse is covered by a retirement plan come into play as to the allowable (if any) deductible funds that can go into a traditional IRA. Of course, the total income limitations must also be resolved.

Was a Form 8606 ever filed?

I also never heard of what the taxpayer "desired" as being a valid position.

FE

[dyne]

The taxpayer had her employer deduct $50 per month from her wages and deposited it
into a bank and she advised the bank that the amount so contributed was to be invested
into a TRADITIONAL deductible IRA. However because she filed seperately or because
of her error a form 8606 was generated and filed and NO deduction for the IRA was
claimed on the tax return. Now I am working on preparing an amended tax return
converting their two seperate tax returns to one JOINT tax return. I found one reference
which said that such an IRA CAN be deducted on the 1040-X. I found in the 8606 instructions
that a non-deductible IRA CAN be converted into a TRADITIONAL IRA and in so doing
an amended 8606 must also be prepared and submitted.

[ddoshan]

I would think that if you file an amended MFJ return the IRA contribution will (if qualified) automatically be deducted as originally desired. At the same time you probably have to correct the original 8606 and submit with the amended return.

I don't know of any reason you could not file an amended return.

[Burke]

I agree with this. As long as she actually made the IRA contribution within the proper time frames, she is merely correcting the return to reflect what it should have in the beginning.

[FEDUKE404]

Deal with any limitations first

I agree with this. As long as she actually made the IRA contribution within the proper time frames, she is merely correcting the return to reflect what it should have in the beginning.

ASSUMING:

1) She and/or her husband are NOT covered by a retirement plan at work (there is a box on the W2...ANY W2 included on H/W/MFJ tax return must be considered!!!... that firmly answers that question)

and

2) Income shown on MFJ return is not too high to prohibit any such contributions from otherwise being deducted.

She can put all kinds of funds into the traditional IRA....I thought the issue here was related to whether those contributions could actually be shown as an adjustment leading to a lower AGI. I still have not seen the answer to that very important question.

If you can successfully jump through ALL of those hoops, then of course an amended return might be prudent.

And at the risk of repeating myself: There is no such thing as "a non-deductible IRA account" !!! If it is a Traditional (and not a Roth) IRA account the investment institution could care less about whether the funds going into the account were/were not deductible on the various tax returns of the owner.

FE

[RitaB]

Right

Correct, and no need to explain what she intended. It is what it is. You are going to be a hero. Charge accordingly.

Edit: "Intended" (get it?) for this to follow Burke's post. Should have quoted.

[AZ-Tax]

If you remember anything, remember this

You are going to be a hero. Charge accordingly.

Super man or woman of Tax Preparation...please charge accordingly

[RitaB]

Furthermore

Always read the title line, too. It adds to the joy.

[Roland Slugg]

AND 2) Income shown on MFJ return is not too high to prohibit any such contributions from otherwise being deducted.FE

Hmmmm ... what limit is that? Is there a new limit I haven't read about that limits a taxpayer's eligibility to deduct his contribution to an IRA, based on his income?

[dyne]

Page 13-11 of TheTaxBook states that IF the individual is an active participant in an
employer sponsered penson plan then the deduction for a traditional IRA is phased
out for 2011 when the modified AGI is between $160,000 to $179,000 for a joint
return or $0 to $10,000 for a MFS return. My client had modified AGI in excess of
$10,000 so was NOT allowed any IRA deduction on her MFS return. On an amended
return their modified AGI would only be about $40,000 so the IRA deduction IS
deductible on an amended return.

[FEDUKE404]

Dollar limitations to IRA accounts

Hmmmm ... what limit is that? Is there a new limit I haven't read about that limits a taxpayer's eligibility to deduct his contribution to an IRA, based on his income?

Ah........YES!.........and it has been that way for many years except the annual dollar amounts have likely increased with time......

Suggest you review the charts here:

http://www.irs.gov/retirement/participant/article/0,,id=202516,00.html

http://www.irs.gov/retirement/participant/article/0,,id=202517,00.html

Pay particular attention to the dollar limits for a MFS return where the other spouse is covered by a retirement plan at work. I assume this severe limit is what started this amended return problem in the first place.

Yes, Box 13 entries on an employee's W2 are quite important!

FE