Claiming Late IRA Deductions

Claiming IRA deductions is a very important part of filing your tax return. A big benefit to having an IRA is that you get favorable tax treatment. Therefore, you don't want to neglect to include the deduction on your taxes. Here are the basics of how you can claim an IRA deduction that you did not include on your initial tax filing.

Available Options

When you contribute to an IRA, the money that you contribute is tax-deductible. This has the effect of lowering your tax burden. As a result, you may get a bigger refund or end up paying less to the government. When you forget to list the deduction, you have two options to fix it. You can file an amended tax return, or you can tell the IRS that you do not want a deduction for the contributions and change your IRA to a Roth IRA. Here are the basics of how to perform each option.

Amended Return

You can file an amended tax return on any of your tax returns for the past four years. Therefore, if you realize that you forgot to deduct your IRA contributions from three years ago, it is not too late to fix this. If you have a tax professional do your taxes for you, you will need to alert him or her to the error. If the tax professional overlooked the potential deduction, he or she will often take care of any costs associated with refiling. If you forgot to provide the appropriate documentation, you may have to pay him or her to refile the taxes. Your tax professional will handle the appropriate paperwork to refile an amended tax return for you and submit it to the IRS.

If you do your taxes alone, you will have to handle the amended return. You can visit the IRS website and download the amended tax return form that you need to get started. 

Gather all of your IRA documents together. If you have receipts that show that you made contributions, then you should include those with your paperwork. When you are filing an amended return, it always helps to have proof that you actually did what you claim. Fill out the amended return form and then attach copies of all of the receipts that you can. Sign the form and make a copy of it for your personal records. Then send the form into the IRS. If you are due a bigger refund, they will send you another check for the difference.

Change to Non-Deductible

If you want to change your contributions to non-deductible, you will also need to download the appropriate form from the IRS website. This one is called Form 8606, and it allows you not to take a deduction on the contributions. Fill it out and send it in to the IRS. Then you will need to contact your IRA provider and have them convert your IRA over to a Roth IRA. 

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