Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: I understand that my client needs to file IRS Form 8606 to report nondeductible IRA contributions.  She has already filed her income tax return for 2011.  Can she file her Form 8606 separately?

Answer: Apparently yes, according to at least one expert.

The purpose of Form 8606 is to help the taxpayer keep track of basis in an IRA as a result of making nondeductible contributions.  Although Form 8606 is normally submitted with Form 1040, the IRS will apparently accept a late-filed Form 8606.  The Form 8606 can be submitted without a Form 1040 or Form 1040X (amended return) if those forms are not otherwise required.

If the form is filed by itself, it should be signed on page two below the written declaration that verifies that a return, declaration, statement or other document is made under penalties of perjury.

What if a taxpayer fails to file a Form 8606?   Upon distribution of any amount from the IRA, the taxpayer should expect to receive an inquiry by the IRS asking to explain and verify the nondeductible portion of any distribution.

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