8606

[MDFTAX]

Dear Community

My client has been doing Roth conversions for several years and has not completed 8606 correctly.

1-Did I enter the correct figures into the below lines of this form?

Line 2-- Basis === Entered My clients lifetime Total Contributions to IRA 

Line 6-- Value of all Traditional IRA === Included the amount that was rollover from his 401K to the IRA only. His other IRA account was $0 at 12/31/24 because he converted that to Roth

2-His spouse has $0 in her Traditional IRA but has done Roth conversions in prior years. Should I completed a 8606 with their tax return this year as well?

Many Thanks in Advance!

[qbteachmt]

Basis is nondeducted contributions = already taxed.

"His other IRA account was $0"

For Roth IRA conversions, all Trad IRA, SEP IRA and SIMPLE IRA are aggregated. Any funds from 401(k) to IRA are included, even if the 401(k) funds that were rolled over are post-tax.

IRA activities are always individual. If her Form 8606 was been wrong, you need to do her info, too.

Do they both have/had commingled funds in their non-Roth accounts?

[MDFTAX]

Thank you--

No comingled funds.

They each have their own accounts.

Spouse did not contribute to her IRA or do any conversions in 2024. 

She has never completed a 8606.

Should I still submit a 8606 for her now or just wait till next year when she contributes and does a conversion?

Many thanks!!!

[qbteachmt · Accepted solution]

"No comingled funds."

In the case of retirement accounts, I used that term for Post-tax mixed with Pre-tax monies.

Retirement accounts are always individually owned.

"Spouse did not contribute to her IRA or do any conversions in 2024."

Does she have pre-taxed (contributions or rollovers) and/or never taxed (earnings) funds existing in any Trad IRA, SEP IRA and SIMPLE IRA? These account types are aggregated for purposes of rollover and conversion. When the answer is other than $0, any conversion will be pro rata taxable.

"She has never completed a 8606."

If she ever converted under the pro rata rules, she should have had Form 8606 and had a taxable event.

In conversion, there is no selective conversion. You don't get to put in a post-tax $5 basis and convert that same $5. Once that contributed $5 is in the account, it is considered part of the aggregated funds. When you then distribute or convert, it is taxed in proportion to all funds that were never taxed. Pro Rata.