1040 Error
My tax preparer erroneously listed a $11,000 conversion from my Traditional IRA to my Roth IRA on my 1040 tax return. The conversion was actually $5,500. Given that the conversion was not a taxable event, my tax preparer indicated there was nothing to worry about and that there is no need to amend the tax return. I am reluctant to believe that misreporting the amount of a conversion, even if is not a taxable event, is nothing to worry about. My concern is that this will impact the tracking of the IRA basis. Is this truly nothing to worry about, or is this a problem requiring an amendment? Thank you!
Permalink Submitted by Alan - IRA critic on Fri, 2019-10-04 02:23
Need more info. The amounts suggest that you were doing a back door Roth IRA and made two years of contributions that must also be reported on Form 8606 presuming they were not deducted.. Form 8606 must also report the amount of any conversion you did, evidently 5500. What happened to the other 5500? What does the 1099R indicate?
Permalink Submitted by Brian Pellis on Fri, 2019-10-04 02:37
Thanks for the quick reply. This is a back door Roth IRA situation… $5,500 contributed to the IRA for 2018 and $5,500 converted to Roth IRA in 2018 as reported on the 8606. However, the 1040 reflects $11,000. This is simply a data entry error on line 4a.
Permalink Submitted by Alan - IRA critic on Fri, 2019-10-04 04:02
Yes, the 1040 should be amended, because it tells the IRS that 11k was distributed. While the 1099R only shows 5500, the IRS might think that the 1099R is correct, or there is another 1099R that is missing. If the tax preparer made the error, you should not be charged for the 1040X preparation. While the IRS might ignore the inconsistency, you probably do not want to keep this in the back of your mind for the 2 years it might take for the IRS to send you an inquiry.
Permalink Submitted by Brian Pellis on Fri, 2019-10-04 04:07
Thank you very much, I sincerely appreciate the advice.