Failure to file 8606
Client made a non-deductible contribution for 2019 but didn’t file form 8606.
1. Does the $50 failure to file penalty apply even if they amend the whole tax return vs. filing the standalone 8606 form?
2. This is the first year they made non-deductible contributions. They just forgot to indicate to the tax prep software that they made contributions to the IRA. It appears they would have a hard time establishing “reasonable cause” for penalty abatement. Since it is the first year they would have needed to file the 8606, is inexperience enough reasonable cause? Other thoughts?
Thank you!
Permalink Submitted by Alan - IRA critic on Mon, 2020-08-31 14:27
The IRS has not been levying the failure to file penalty and has been accepting retroactive 8606 forms for many years. There is no need to provide an explanation of cause. Assuming there was no distribution made which would result in the need for a 1040X, all they need to do is send in a stand alone 2019 8606 with the contribution shown since the rest of the return was not affected.
Permalink Submitted by Treavor Dodsworth on Mon, 2020-08-31 16:49
Thank you!