Eda44 wrote: Thu Oct 16, 2025 12:41 pm
Hello!I filed a tax extension this year and ended up doing my taxes solo at the very last minute via Free Tax USA due to some unfortunate circumstances. It’s my first solo run with any tax software. Typically my tax preparer completes all the necessary forms and I review the 8606; after a decade, I know how it should look, and all is well. Well, I now have doubts that I made mistakes on the details of my conversion based on how I answered certain questions, and would love to get feedback/reassurance. If I need to amend, it would be helpful to know that. The worst part is not knowing what I don’t know.
Note: I contributed $7000 to my Trad IRA and converted it to my Roth ASAP in the same year; there was $4 of earnings.
1. My 8606 didn’t look right at first; thanks to Bogleheads, I troubleshot with the info on The Finance Buff and got it to look the way it should. The one thing that stands out is that my actual Vanguard 1099R has a checked box 2b next to Total distribution; however, the Finance Buff advises leaving this unchecked, so I did. Since things look right on the 8606 and form 1040 line 4a ($7004), am I okay? It just seems odd to not transcribe the exact info on the 1099R.
EDIT: The 8606 preview looked good before I filed. But now that I see the actual return post-filing, it does not! It is missing lines 6 through 12. :/.
2. I notice the extra $4 is not reported on 1040 line 4b, and I feel like it should be, at least according to the Finance Buff (note: their example shows a much larger excess of $200). It’s also not helpful that Finance Buff has blocked out most of their numerical entries — I can’t tell if they are entering $7000 or $7200, and this matters in the outcome of the form. I was under the impression that anything over the exact contribution limit is to be reported, even $1. Secondly, this $4 is reported on form 5329 when I view the return, but, only lines 15 and 16 show the $4. I would expect it to show up on line 25. And then form 1040, line 8. Nope.
Everything I’ve read says I should be paying an excise tax of 6% on even a $1 excess contribution. Why isn’t it showing up and why does it seem I am not showing tax liability for it?
Another interesting note is that the Finance Buff suggests clicking “No” to excess IRA contributions in a given year, but includes the entire amount rolled over ($200 excess and all) everywhere else; clearly the excess shows up in the tax return despite the “No”. So, despite how I answer the question, as long as the forms look right, is that a good sign? This applies to Turbo Tax, etc.
3. It’s not the cost of the minute taxes on $4, obviously, but the fear that I am somehow missing the directive to pay because I possibly messed up the forms based on the way I answered questions in Free Tax USA. Where did I go wrong? If I needed to pay taxes on it, would it be the 6% excise tax, and taxes on the $4 as ordinary income on top of that? How would I pay that? Is it annually like everything I read online appears to indicate? Is that owed tax on the $4 factored into my total refund amount, or do I need to take separate action to pay it? Even if it’s $1.50 of tax, I would rather not ignore unpaid taxes.
Note: In the past, I’ve had one backdoor Roth IRA conversion excess amount of $1 or similar. The tax preparer just stated I would owe taxes on the $1, but there was never discussion of paying taxes on it every single year in perpetuity unless I remove it, which is what the IRS website (etc.) indicates. Not sure what I am misunderstanding here, as finance sites seem to treat the excess like no big deal. Wouldn’t removal of the tiny excess be a headache since I am not 59.5? Now I am worried that all my tiny excess contributions from the few days accrual after sitting in the Trad IRA are somehow unaccounted for and will be a big tax headache later.
I know small investment earnings like this are a very common issue and hard to avoid; I’m just not sure how to manage these for 2024 taxes and going forward for peace of mind. I hate tax surprises .
Thank you in advance for reading this far!
