Tracking down non-deductible contribution
Tracking down non-deductible contribution
I have been investing for close to 30 years now. I appear to have lose track of my non-deductible contribution. Do you suggest a way to track it down? I think I only made one or two non-deductible contribution and it was a long time ago. I have tried to track it down in my tax return but it's too far back.
Re: Tracking down non-deductible contribution
It should have been on the tax return (8608 form I think from memory). Not sure if the IRS has a way to get the last return that had that....
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Rob |
Its a dangerous business going out your front door. - J.R.R.Tolkien
Re: Tracking down non-deductible contribution
I don't think there is a way other than by having the last 8606 you filed.
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Re: Tracking down non-deductible contribution
The only way to officially track it is on your last filed IRS Form 8606. This is why it is sometimes recommended to continue to file (or at least fill out) form 8606 even if you have not made a non-deductible contribution, just to keep a current record of your basis (non-deductible contributions). Specifically, if you do not know the basis in your traditional IRA, it will almost certainly be impossible for your beneficiaries to do so at a later date.
If you can no longer find your Form 8606s, you will only be able to make an estimate based on your contribution history (did you always max out your IRA contributions?) and salary history (as an approximation for MAGI eligibility for a deductible contribution in a given year).
However, if you cannot determine your basis and the contributions were made many many years ago, it is likely that the basis is a small fraction of the total account value now. Thus, it is not the end-of-the-world to pay taxes on it again. Not the best solution, but one that has less risk than claiming more basis than you actually have.
If you can no longer find your Form 8606s, you will only be able to make an estimate based on your contribution history (did you always max out your IRA contributions?) and salary history (as an approximation for MAGI eligibility for a deductible contribution in a given year).
However, if you cannot determine your basis and the contributions were made many many years ago, it is likely that the basis is a small fraction of the total account value now. Thus, it is not the end-of-the-world to pay taxes on it again. Not the best solution, but one that has less risk than claiming more basis than you actually have.
Re: Tracking down non-deductible contribution
Since the unused basis carries over from year to year, if you’ve used the same software brand all these years and always start by importing the previous year tax data file, it is possible it is “hidden” in the file.
Do a what-if tax return for 2021 by first importing your 2020 data file. Give yourself some 2021 wages, like $100k. Then pretend you made a 6,000 non-deductible contribution, and converted the same amount.
Does the software generate a 8606 showing a carryover of basis into 2021?
You could also stop and think about this for a bit. If you only contributed non-deductible one or two times and took out IRA withdrawals since then (for Roth conversions or not), you would have been pulling some basis out each time (and wouldn’t have paid taxes on every single dollar withdrawn). And if the non-deductible contribution was made more than 10 years ago, the maximum you could have contributed was less than what you can do these days. So it seems, even if you could figure out the amount, it likely isn’t worth the time it takes to figure it out again.
Do a what-if tax return for 2021 by first importing your 2020 data file. Give yourself some 2021 wages, like $100k. Then pretend you made a 6,000 non-deductible contribution, and converted the same amount.
Does the software generate a 8606 showing a carryover of basis into 2021?
You could also stop and think about this for a bit. If you only contributed non-deductible one or two times and took out IRA withdrawals since then (for Roth conversions or not), you would have been pulling some basis out each time (and wouldn’t have paid taxes on every single dollar withdrawn). And if the non-deductible contribution was made more than 10 years ago, the maximum you could have contributed was less than what you can do these days. So it seems, even if you could figure out the amount, it likely isn’t worth the time it takes to figure it out again.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Tracking down non-deductible contribution
I made after tax contributions to our t-ira's many years ago and I did not know I needed to file form 8606. about 10 years ago I realized the error of my ways and filled out the form 8606 for each year (for both me and DW) and added a cover letter explaining it. The after tax contributions were all in separate t-ira's and I had a record of when these accounts was opened so I did have some proof (and I had not deducted those t-ira contributions from our taxes). I never heard back from the IRS, my wife converted all her t-ira to a Roth a few years ago, I still have an after tax basis in my t-ira.
Re: Tracking down non-deductible contribution
If you have the returns and the 5498s you can reconstruct it. I did this for a tax client once who discovered (remembered?) that her mother had been depositing money in her IRA and it was never reported as a deduction or on an 8606.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Re: Tracking down non-deductible contribution
If you made deductible contributions on either side of non-deductible ones, and you have kept copies of past IRS returns, you can locate one (s) where no deduction was claimed. That assumes you did not file Form 8606 with your return.
Tim
Tim
Re: Tracking down non-deductible contribution
True: if you still have the documentation you would have needed to complete the last 8606 but either didn't do that or selectively lost the 8606, then you can recreate that last 8606.
Re: Tracking down non-deductible contribution
I am able to track down return from 22 years ago, but after it's in paper and in one of the boxes that I didn't unpack after the 3nd or 4th move. I am pretty sure that I have very little non-deductible contribution. If I "forget", the IRS won't care right. They only care if I overstate my non-deductible portion?
Re: Tracking down non-deductible contribution
Correct. If you overstate your taxable income at withdrawal hey will not know or care.gavinsiu wrote: ↑Wed Aug 10, 2022 6:41 pm I am able to track down return from 22 years ago, but after it's in paper and in one of the boxes that I didn't unpack after the 3nd or 4th move. I am pretty sure that I have very little non-deductible contribution. If I "forget", the IRS won't care right. They only care if I overstate my non-deductible portion?
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications