You are here:

Tax Law (Questions About Taxes)/Non-deductible IRA/Form 8606

Advertisement


Question
Dear John,
I just received an IRS notice for year 2012 in which my allowable IRA contribution for 2012 was decreased by $1,000. So that makes the $1,000 amount now non-deductible. My questions are:
1. This amount is already in the IRA account (from 2012). Do I/or should I have this amount distributed/converted to Roth (not sure if there's income limitations to doing this).
2. I've already filed my 2013 return. Do I need to amend the return to include form 8606 for the non-deductible amount of $1,000, or can form 8606 be filed by itself at any time?
3. If I leave the non-deductible amount of $1,000 in the IRA account, will I need to file form 8606 every year even if I don't have additional non-deductible contributions in those years?
4. Any other advice you can give on this issue would be very valuable!
Thank you very much for your time,
Kate

Answer
Kate,

Thanks for your question.

1. You could convert the amount to a Roth.  I, personally, am a big fan of Roth accounts, so it is something I would definitely recommend.  The income limitations were removed.  Before 2010, there was a $100,000 income limitation. The amount is already non-deductible.  Convert to a Roth and the earnings become non taxable.

2. You don't need to file an amended return, just file the 8606 separately.

3. Yes, that's the bad part about having non-deductible contributions, you have to file the 8606 every year.

4. Converting the amount to a Roth will save you money in the long run not to mention the hassle of keeping up with filing an 8606 every year.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

All Answers


Answers by Expert:


Ask Experts

Volunteer


John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

©2016 About.com. All rights reserved.