“In 2012” versus “For 2012”
As I noted in another post (https://irahelp.com/forum-post/18860-recharacterize-or-distribute-and-re-contribute), I soon plan to recharacterize a series of 2012 Roth IRA contributions to be treated as if I made 2012 TIRA contributions. I will also have to file IRS paperwork to show those 2012 TIRA contributions were not deductible because of my 2012 income combined with my spouse’s. And then I plan to convert the TIRA to a Roth IRA via what is called a “backdoor Roth”. But the part on Form 8606 that says “In 2012, did you take a distribution from traditional, SEP, or SIMPLE IRAs, or make a Roth IRA conversion?” is confusing me. I think my answer is no since the conversion is in 2013. Or is it yes because my conversion is for my 2012 tax year?
Assuming the answer is “no”, and assuming that I have no basis in any TIRA because I have no TIRA accounts at this time (even though I once did before converting it to a Roth many years ago), I arrive at line 16. It says “If you completed Part I, enter the amount from line 8. Otherwise, enter the net amount you converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2012.” Since I would have skipped line 8 by this point, I’m left just analyzing the second statement, right? But again it says “in 2012”. Is this a “0” since the conversion isn’t taking place until 2013?
But then the instructions for line 16 also state “If you did not complete line 8, see the instructions for that line. Then, enter on line 16 the amount you would have entered on line 8 had you completed it.” First, does this statement from the Instructions for Form 8606 contradict the statement “Otherwise, enter the net amount you converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2012”? I ask because if I did look at the instructions for line 8, it again uses that “dreaded” phase “in 2012” like so: “If, in 2012, you converted any amounts from traditional, SEP, or SIMPLE IRAs to a Roth IRA, enter on line 8 the net amount you converted.” Again, none of the stuff I plan to do has been done yet.
I’m not sure what to do here.
Permalink Submitted by Alan - IRA critic on Tue, 2013-02-05 04:53
Permalink Submitted by Amar Patel on Sat, 2013-02-09 21:46
I’m getting to my destination of understanding step-by-step with your help and it is greatly appreciated.The next step in the journey: is it possible to have a basis in a TIRA if I have no TIRA (thus no balance) that I know of? That might sound like a silly question but I’ve had one before, years ago. But then I converted that, when I was single and earning less than I do now, to a Roth and closed it.But Form 8606 for 2012 asks for my basis in a traditional IRA on Line 2. The instructions state to go back to the last 8606 I filed and enter whatever I had on line 14 there. At the moment I do not have access to my old returns. But assuming I gain access soon and assuming I can find any old Form 8606 at all, if line 14 from that year is anything but 0, how does that jibe with not having any TIRA today that I know of?
Permalink Submitted by Alan - IRA critic on Sun, 2013-02-10 00:22
If you can locate your last 8606, you can bring forward the amount on line 14. However, there would not be an amount on line 14 in many cases, because line 14 is in Part I and you do not complete Part I if you converted your entire TIRA balance UNLESS you also made a non deductible TIRA contribution for that same year. Having a left over basis itself is rare because most people either make deductible contributions or roll over pre tax employer plan balances, either of which is very likely to make the IRA balance exceed the basis. Due to the importance of line 14, for people who have excess basis in their IRA. to preserve the line 14 figure it makes sense to not convert the entire value, but leave perhaps $100 in the TIRA and that would always produce a line 14 because it would require Part I of Form 8606 to be completed whether you made a non deductible contribution that year or not.
Permalink Submitted by Amar Patel on Sat, 2013-03-02 22:39
I’m just now finally able to go through old tax filing paperwork to prepare my return for 2012. I looked for an old Form 8606 to start my 2012 Form 8606, but I don’t seem to see a copy of it in my paperwork. But the 2012 version of the form did look familiar… which suggests to me that perhaps I’ve seen it before this year. So I wonder:1) Can I easily ask the IRS what, if any, Forms 8606 they have on file for me?2) If the answer is “none” or I can’t reach them in time or they don’t otherwise force the issue, what, if any, are the ramifications of not having filed any Form 8606 before? I do see that I once had a rollover IRA that I converted in full it seems to a Roth IRA in 2009, and my 1040 for 2009 reflects the converted amount on Line 15.
Permalink Submitted by Alan - IRA critic on Sat, 2013-03-02 23:32
You don’t even have an 8606 on your 2009 return? A conversion requires it, and it would include recovery of any basis from prior year non deductible contributions. I don’t think you can ask the IRS to look for a particular form you filed, but even if they found one, it would not be that useful. These forms are cumulative, so if any year is wrong, those omissions are also included in later year 8606 forms. If your taxable amount on the 2009 conversion is the same as the amount converted, it would mean that you did not think you had any basis in 2009. Note that 4/15/2013 is the deadline to amend your 2009 return should you be able to piece together prior information. If you have had the same IRA custodian for the last several years, they may provide records of your contributions, but would not know if you deducted them or not. But if you made a Roth contribution for the full amount, that eliminates a TIRA contribution for that particular year.
Permalink Submitted by Amar Patel on Sun, 2013-03-03 17:19
I’ve checked and rechecked my stack of 2009 tax paperwork and don’t see a 8606 for that year. Nor do I see it in any other paperwork from 2007 onward, just in case it got misplaced in the wrong stack. I did look back at the IRS site for Form 8606 for 2009, and just completed it to see what would have happened if it were completed in 2009. Line 15 of my 2009 1040 does seem to include the result that the 8606 would have required me to enter. So this means to me that I did actually once complete the paperwork and somehow didn’t retain a copy through the years OR that I just got lucky somehow. And with the IRS, I don’t believe in luck. I believe in getting it right. So what would happen if I sent in a 8606 for 2009 and the IRS already had one on file for me? Would it be considered a duplicate or replacement, and would a fee/penalty be assessed?
Permalink Submitted by Amar Patel on Sun, 2013-03-03 22:03
This post appears to have been violated by a spammer. Can someone remove that other post?