Prior years Form 8606

Taxpayer has not filed Form 8606 on non-deductible (or deductible but he did not claim the deduction) IRA contribution for the last ten years. I understand the former Form 8606s can be filed by themselves if they did not change the tax.

Should all the 10 years Form 8606s be mailed in one package? Or should each of them be mailed separately?

Total basis on line 2 builds on the prior year's basis so I would mail them all in the same package in chronological order.

I have read chance is that late filing Form 8606 will not be penalized, which is good news to this taxpayer.

Therefore, I am just wondering would filing each of the Form 8606s separately help to reduce the chance of the penalties ($50 on each one) to be imposed?

My thinking is that if the taxpayer file all the 10 years of Form 8606s in one package, the agent who processes the case is more likely to see it as a more serious situation, and therefore the chance of imposing the penalties will be higher.

But then if he files each of the Form 8606s separately and therefore each of them will be processed individually, the chance of them falling through the cracks and therefore not being penalized may be higher.

Does anyone agree or disagree with my thinking?

I’ve never seen the penalty imposed, and I was always taught (by ex IRS agents) to mail each return year in a separate envelope. I mailed out 15 years in separate envelopes for a client because I just loooovvee and fully support our wonderful US Postal Service (sarcasm implied) for a single client; never received one penalty letter. Howard’s idea isn’t a bad one, but I know IRS agents can be lazy (sorry IRS, but it’s true), see one 8606 and literally toss the others in the Fahrenheit 451 pile.

Honestly, I think just because the IRS can, doesn’t always mean they will, but what a layup for them. Cha Ching, how many $50 bills they could be racking up here and they don’t; strange indeed.

Go with your gut all the time MI, if mailing separately gives you the warm and fuzzies, and honestly, we are trying to insulate the client from IRS harm, go for it. You’d be in compliance and serving the client well. 50 cents per envelope won’t send them to the soup kitchen, I’m sure. Happy Thanksgiving!

I understand the former Form 8606s can be filed by themselves if they did not change the tax.

Would you mind posting where you're getting your understanding?

The 2020 Form 8606 instructions seem clear that if a 1040 is required to be filed, Form 8606 should be filed with the timely filed return. They do not specify what happens when an 8606 is not filed with the original 1040 due to oversight.

Page 6 (ooh, juicy) of the instructions state, “ Penalty for Not Filing
If you are required to file Form 8606 to report a nondeductible contribution to a traditional IRA for 2020, but don’t do so, you must pay a $50 penalty, unless you can show reasonable cause.”