Filing 8606 for 2009 nondeductible contribution after filing 2009 tax return

[Guest Leonard W. Barry MS CFP]

What happens if someone has already filed their 2009 tax return, then decides to make a nondeductible Traditional IRA contribution for 2009 before April 15? They need to document this contribution on Form 8606; I'm wondering how to accomplish this.

I searched this forum and the Fairmark.com forum. I am finding two different answers: File a Form 1040X with an 8606, or just send the 8606 in by itself.

The instructions for Form 8606 only mention submitting an 8606 by itself if the person is not otherwise required to file a tax return, but needs to file an 8606. I know doing a Form 1040X isn't that hard, but for clients who do their own taxes, submitting an 8606 by itself would be preferable to doing a 1040X.

[Guest redsands]

From everything I have read you can submit the 8606 alone. Supposedly, there is a $50 fee but the IRS seems to be ok with people sending in the 8606 alone and waiving the fee.

This is becoming more and more common because preparers have done a horrible job at booking these contributions.

If it were my return, I would send it alone. I think it is the lesser of two evils. I know the IRS audit department perks up with 1040 amendments.

You propably should post this question here:

http://www.irahelp.com/forum/viewforum.php?area=&f=1

Alan is a really good source. You can also look to see if it has already been posted.

[Borsley]

If it were my return, I would send it alone. I think it is the lesser of two evils. I know the IRS audit department perks up with 1040 amendments.

I don't want to get this discussion too far off-track, but can you substantiate this claim that amended 1040's increase the chance for IRS audit?

I worked for 3 or 4 years in the tax preparation industry and this was definitely not the understanding we had or communicated to clients. That was 6 or 7 years ago, so maybe something has changed. Also, I do believe the "tax hints" in TurboTax maintain and communicate a similar understanding. That is, there is no increased risk for audit by filing an amended return.

I know for a fact, the IRS has gone on record saying this creates no increased scrutiny.

I believe this is a common misunderstanding (and can be hurtful to a taxpayer that may have good reason to file amended, but doesn't due to an unwarranted concern). If there is truly a credible source that can confirm the increased audit chance, I'd be very interested in seeing/reading it.

Thank you,

[Guest redsands]

Well, you are taking this a bit off track because I am speaking in relation to the lesser of two evils. Sending in an 8606 alone or doing a 1040X...hmmm...I would opt for the 8606.

I doubt if there are any valid sources for these types of detailed audit figures since the audit process ebbs and flows based on how much financial or political pressure the treasury is feeling from one year to the next. Also, the audit process isn't transparent...for obvious reasons.

My experience and simple logic appears that when you go from e-filing (which most returns are), then paper amendment re-filing (which most amendments are), you open yourself up. Especially in this case since the taxable figures don't change. That could make an IRS agents head explode. E-filings are electronic feeds compared to paper filings which have human contact.

In terms of this being "hurtful", I am not giving advice to other people in other situations. I said that PERSONALLY once I e-file I would worry about paper filing a 1040X just because I want to make sure my 8606 basis is present.

Obviously, you have to file 1040X's most other times but this case is an exception since it doesn't change current taxes and there is a process for filing 8606's separately.

Please don't expand my advice beyond this message string. I don't believe in giving global-suze-orman-esq-advice.

[Borsley]

Yes, this is a bit of a tangent (as I readily acknowledged in my first sentence of my last comment). My point wasn't to question the "lesser of two evils" (extra 8606 vs. 1040X). I tend to agree with that conclusion. I was simply (and probably could have done a better job asking) about this statement that you provided that appears to be a statement of fact (not opinion).

I know the IRS audit department perks up with 1040 amendments.

It is my understanding that this is not true (and I provided the basis of that understanding) , but am always open to new information. I realize things change, but I also realize there has been a past incorrect perception by the public that amendments increase the chance of audit. I've never seen or heard anything (backed up with evidence) that suggests this to be true.

NOTE: All amended filings must be filed via paper. This has been the case since the advent of amended filings. There is no electronic option for these (and I don't believe there ever has been one). Thus, the fact that initial filings are filed electronically (and the numbers keep increasing), doesn't change the fact that amended filing come in each year on paper.

There may be some validity (although, again, I've never seen or heard evidence of this) that a paper filed INITIAL filings might stand out (given the increase in e-filing on "initials" ) but I think that is pure speculation at this point especially considering the millions of paper filing that still exist today.

[Guest redsands]

Thanks for your clarification.

I don't know much about the workings of the IRS and I don't really want to. I know experience. I have worked with thousands of clients over the last 20 years being in the financial planning business. I have worked with MANY CPA's and that is what has been relayed to me by them from their experience. Perceptions can actually come from somewhere. Perhaps CPA's have all made a pact to tell everyone this so that their clients have all of their stuff together. Maybe they are furthering this urban legand.

There are several articles online from people who have had bad experiences paper filing that return. It gets lost, misunderstood, etc. Google it and you will see. Perhaps these are rare and just unhappy people but I think ANY time you depend on them opening mail there is a danger. Just last year I filed my own 1040X and I had to send it twice. The first one was lost. So, perhaps it is just us unlucky Californian's since our returns flood the Fresno office. Not sure.

I appreciate you calling me on the mat though. We need more activity on these boards!

[Guest redsands]

I did want to say one more thing.

I did give the original poster a link to pose the question to a far more experienced person than I. Ultimately, I think the poster wanted an opinion...judgment call.