I was a complete idiot and didn't realize until recently(I'm 31 now) that I was supposed to have filed an 8606 with my non-deductable 2K yearly IRA contribution. I'vebeen contributing 2K to an IRA since 1991. I only realized this whenMorgan Stanley started to charge an IRA fee. I have two IRAs,one a 401K Rollover and the second being a regular IRA. I've kept them separate since one has pretax money in it and the other hasnondeductible contributions. I was told I could combine the two accounts because the 8606 would establish my basis for the non-deductable money.I didn't file this form and really would like to combine the two accounts since Morgan Stanley started to tack all kind of charges to their fees. It's $75 to terminate each account. I'd rather combine the two and pay the fee only once.Any advice?Mariam
You can file amended returns for all previous years. There is supposedly some penalty for late filing of the 8606, but sometimes it isn't enforced.If nobody else responds here, also try asking on "Tax Strategies".
Hi Mariam,I did the same thing (didn't file 8606s), and only discovered the error in 2000 after I had retired. After calling the IRS, and explaining my dumb error, they said I would have to do the following: (1) provide an explanation of why I didn't file the 8606s, (2) fill out back copies of the 8606s, (3) provide proof of purchase of the IRAs - copies of OMB No. 1545-0747, Form 5498, and (4) provide proof that deductible IRAs had not been claimed in those years - copies of form 1040.After I had done that, they said they might not charge me with a penalty - if I was up front, honest and nice about the whole issue. I guess I must have met their goal for niceness or at least had my packet of material received on one of their better days - as I was not penalized for my omission.If I were you I would start with a call to the IRS and explain the situation. Good luck.Aljo
Thanks so much Aljo,I'm good on 1,2 and 4 but 3 has me worried:(3) provide proof of purchase of the IRAs - copies of OMB No. 1545-0747, Form 5498, Was this yet another form I was supposed to fill out every year?Mariam
No, it's something your broker sends you each year. You don't have to file it because your broker already filed the original with the IRS -- you just got a copy.
My IRA is with Morgan Stanley. Are they required to send me a copy of this form 5498? I've never received one only a 1099 showing the dividends. Since it's an IRA, I ignore the 1099 since I don't owe taxes on it yet.Mariam
They are required to send you a 5498 in the year you contribute, and the year after you contribute.
Hi Mariam,jrr7 is correct. You should have received a 5498 from your broker. It is the same info that your broker sends to the IRS.For some reason in my case they wanted copies of that sent with all the other information that I submitted.Aljo
If it's an IRA, they shoud *NOT* be sending you a 1099.Sounds like MS may have made a mistake concerning the registration of your account. Call them up and ask whether the account is registered as taxable or an IRA. If IRA, then they shouldn't have sent you a 1099, and they should have sent you a 5498 each year you contributed.
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