Question

Incorrect non-deductible IRA contribution submitted

Forum|Forum|2 years ago
April 26, 2024
2 replies
0 views

When preparing our joint 2023 tax return in TT, I indicated that each of my wife and I made non-deductible IRA contributions of $7500 each for 2023, thus increasing our basis. Unfortunately, I just discovered that her contribution never went through, and the return was already e-Filed.

Do I have to do anything to correct this, or does she just make her non-deductible $8000 2024 contribution now and only enter $500 for the contribution amount in next year's tax return, thus correcting the basis?

Thanks.

DMarkM1

Yes. Assuming the non-deductible 7500 contribution was captured/reported on the 2023 form 8606 she can make non-deductible contributions in 2024 and report on the 2024 return the amount over the already reported 2023 amount to show the correct basis.

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A

AdamBATLAuthor

Thanks for the quick and helpful answer.

D

dmertz

Employee

If an incorrect 2023 Form 8606 was filed (which is what appears to have happened) the incorrect form must be amended. I'll assume that the reported contributions were nondeductible due to MAGI and participation in a workplace retirement plan, otherwise there is also the possibility of an inappropriate Retirement Savings Contributions Credit having been reported on Form 8880.

When beginning your 2024 tax return with TurboTax, you'll want to begin by transferring in from the tax file that contains the amended Form 8606 so that the IRA Information Worksheet in 2024 TurboTax shows the correct basis is carried in from 2023.

Whatever contributions you and your wife make for 2024 are entirely independent of what was or was not contributed for 2023. Trying to fudge the numbers by entering a smaller 2024 contribution than actually made and not amending the incorrect Form 8606 will cause discrepancies between what is reported on the tax returns and what is reported to the IRS by the IRA custodian on Forms 5498, potentially raising a red flag with the IRS.

A

AdamBATLAuthor

Well, now I'm stumped because this contradicts the last response. Thanks for giving me your input. I guess my next move will be to ask the IRS.

For the record, you are correct: The reported contributions were nondeductible due to MAGI and participation in a workplace retirement plan. Form 8606 indicated it as such. It just turned out that the contribution for my wife was never processed, and it is now too late to make a 2023 contribution. Assuming that the answer from the IRS is that I must amend it, is there a way to do that in TT? If I can't re-efile, do I just mail in the amended form to them? To where?

Thanks

D

dmertz

Employee

The 2023/2024 tax results are the same either way. However, the law requires that nondeductible contributions be reported, so reporting on the 2024 tax return only $500 of an actual $8,000 nondeductible contribution for 2024 would technically be a violation of section 408(o)(4) of the tax code. It's your choice.