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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121565  
Subject: Re: unintentional non-deductible contributions Date: 3/5/2001 8:56 AM
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we are only talking about approximately $2,600 on the conversion. i calculated my basis (by adding all of my unintentional non-deductible contributions over the years) at approximatley $2,500. as such, it is my understanding that my taxable conversion amount is approximately $100 and this should be reflected in Part II of form 8606 (this was a TOTAL conversion).

who is correct? the h&r block agent or me? if the h&r agent is correct, then i would be paying taxes on my contributions TWICE! i can't imagine the irs endorsing people paying taxes twice in such a scenario just because deductions were not taken on the contributions previously.

once again, i would appreciate any comments, advice or suggestions. this is the only thing that is holding up my 2000 year returns. this is becoming very worrisome.


Well, everyone's kinda correct and kinda not. The Block preparer is correct that you establish your previously-taxed basis in your traditional IRA by filing Form 8606. I can well understand why a paid preparer, who is liable for penalties for an improper return, would not prepare the return the way you want it prepared.

I'm not sure anyone knows how picky IRS is about this rule. If you have a record of all your contributions and copies of your returns showing you never deducted the contributions, I'd say go ahead and treat them as nondeductible contributions, resulting in the Form 8606 that you propose. It may not be right, and it might not stand up under an audit, but I think it's worth a shot. It's certainly not fraudulent or a flagrant disregard for the rules.

Phil Marti
VITA Volunteer
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