Federal Form 8606 Instructions

Future Developments

For the latest information about developments related to Form 8606 and its instructions, such as legislation enacted after they were published, go to www.irs.gov/form8606.

What's New

Modified AGI limit for Roth IRA contributions increased. You can contribute to a Roth IRA for 2014 only if your 2014 modified adjusted gross income (AGI) for Roth IRA purposes is less than:

• $191,000 if married filing jointly or qualifying widow(er),
• $129,000 if single, head of household, or married filing separately and you did not live with your spouse at any time in 2014, or
• $10,000 if married filing separately and you lived with your spouse at any time in 2014.

See Roth IRAs, later.

Purpose of Form

Use Form 8606 to report:

• Nondeductible contributions you made to traditional IRAs;
• Distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs;
• Conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs; and
• Distributions from Roth IRAs.

Additional information. For more details on IRAs, see Pub. 590-A, Contributions to Individual Retirement Arrangements (IRAs) and Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs).

TIP. If you received distributions from a traditional, SEP, or SIMPLE IRA in 2014 and you have never made nondeductible contributions (including nontaxable amounts you rolled over from a qualified retirement plan) to traditional IRAs, do not report the distributions on Form 8606. Instead, see the instructions for Form 1040, lines 15a and 15b; Form 1040A, lines 11a and 11b; or Form 1040NR, lines 16a and 16b. Also, to find out if any of your contributions to traditional IRAs are deductible, see the instructions for Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32.

Who Must File

File Form 8606 if any of the following apply.

• You made nondeductible contributions to a traditional IRA for 2014, including a repayment of a qualified reservist distribution.
• You received distributions from a traditional, SEP, or SIMPLE IRA in 2014 and your basis in traditional IRAs is more than zero. For this purpose, a distribution does not include a rollover, qualified charitable distribution, one-time distribution to fund an HSA, conversion, recharacterization, or return of certain contributions.
• You converted an amount from a traditional, SEP, or SIMPLE IRA to a Roth IRA in 2014 (unless you recharacterized the entire conversion - see Recharacterizations, later).
• You received distributions from a Roth IRA in 2014 (other than a rollover, recharacterization, or return of certain contributions - see the instructions for Part III, later).
• You received a distribution from an inherited traditional IRA that has basis, you rolled over an inherited plan account to a Roth IRA, or you received a distribution from an inherited Roth IRA that was not a qualified distribution. You may need to file more than one Form 8606. See Pub. 590-A and Pub. 590-B for more information.

Note. If you recharacterized a 2014 Roth IRA contribution as a traditional IRA contribution, or vice versa, treat the contribution as having been made to the second IRA, not the first IRA. See Recharacterizations, later.

TIP. You do not have to file Form 8606 solely to report regular contributions to Roth IRAs. But see What Records Must I Keep, later.

When and Where To File

File Form 8606 with your 2014 Form 1040, 1040A, or 1040NR by the due date, including extensions, of your return.

If you are not required to file an income tax return but are required to file Form 8606, sign Form 8606 and send it to the Internal Revenue Service at the same time and place you would otherwise file Form 1040, 1040A, or 1040NR. Be sure to include your address on page 1 of the form and your signature and the date on page 2 of the form.

Definitions

Deemed IRAs

A qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. If in 2014 you had a deemed IRA, use the rules for either a traditional IRA or a Roth IRA depending on which type it was. See Pub. 590-A for more details.

Traditional IRAs

For purposes of Form 8606, a traditional IRA is an individual retirement account or an individual retirement annuity other than a SEP, SIMPLE, or Roth IRA.

Contributions. An overall contribution limit applies to traditional IRAs and Roth IRAs. See Overall Contribution Limit for Traditional and Roth IRAs, later. Contributions to a traditional IRA may be fully deductible, partially deductible, or completely nondeductible.

Basis. Your basis in traditional IRAs is the total of all your nondeductible contributions and nontaxable amounts included in rollovers made to traditional IRAs minus the total of all your nontaxable distributions, adjusted if necessary (see the instructions for line 2, later).

CAUTION. Keep track of your basis to figure the nontaxable part of your future distributions.

SEP IRAs

A simplified employee pension (SEP) is an employer-sponsored plan under which an employer can make contributions to traditional IRAs for its employees. If you make contributions to that IRA (excluding employer contributions you make if you are self-employed), they are treated as contributions to a traditional IRA and may be deductible or nondeductible. SEP IRA distributions are reported in the same manner as traditional IRA distributions.

SIMPLE IRAs

A SIMPLE IRA plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Your participation in your employer's SIMPLE IRA plan does not prevent you from making contributions to a traditional or Roth IRA.

Roth IRAs

A Roth IRA is similar to a traditional IRA, but has the following features.

• Contributions are never deductible.
• Contributions can be made after the owner reaches age 70½.
• No minimum distributions are required during the Roth IRA owner's lifetime.
• Qualified distributions are not includible in income.

Qualified distribution. Generally, a qualified distribution is any distribution from your Roth IRA that meets the following requirements.

1. It is made after the 5-year period beginning with the first year for which a contribution was made to a Roth IRA (including a conversion or, in the case of a qualified retirement plan, a rollover) set up for your benefit, and
2. The distribution is made:
   1. On or after the date you reach age 59½,
   2. After your death,
   3. Due to your disability, or
   4. For qualified first-time homebuyer expenses.
    

Contributions. You can contribute to a Roth IRA for 2014 only if your 2014 modified AGI for Roth IRA purposes is less than:

• $191,000 if married filing jointly or qualifying widow(er),
• $129,000 if single, head of household, or if married filing separately and you did not live with your spouse at any time in 2014, or
• $10,000 if married filing separately and you lived with your spouse at any time in 2014.

Use the Maximum Roth IRA Contribution Worksheet, later, to figure the maximum amount you can contribute to a Roth IRA for 2014. If you are married filing jointly, complete the worksheet separately for you and your spouse.

CAUTION. If you contributed too much to your Roth IRA, see Recharacterizations, later.

Modified AGI for Roth IRA purposes. First, figure your AGI (Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37). Then, refigure it by:

1. Subtracting the following.
   1. Roth IRA conversions included on Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b.
   2. Roth IRA rollovers from qualified retirement plans included on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b.
    
2. Adding the following.
   1. IRA deduction from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32.
   2. Student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33.
   3. Tuition and fees deduction from Form 1040, line 34; or Form 1040A, line 19.
   4. Domestic production activities deduction from Form 1040, line 35; or Form 1040NR, line 34.
   5. Exclusion of interest from Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989.
   6. Exclusion of employer-provided adoption benefits from Form 8839, Qualified Adoption Expenses.
   7. Foreign earned income exclusion from Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.
   8. Foreign housing exclusion or deduction from Form 2555.
    

CAUTION. When figuring modified AGI for Roth IRA purposes, you may have to refigure items based on modified AGI, such as taxable social security benefits and passive activity losses allowed under the special allowance for rental real estate activities. See Can You Contribute to a Roth IRA? in Pub. 590-A for details.

Distributions. See the instructions for Part III, later.

Maximum Roth IRA Contribution Worksheet

Caution: If married filing jointly and the combined taxable compensation (defined earlier) for you and your spouse is less than $11,000 ($12,000 if one spouse is 50 or older at the end of 2014; $13,000 if both spouses are 50 or older at the end of 2014), do not use this worksheet. Instead, see Pub. 590-A for special rules.

Overall Contribution Limit for Traditional and Roth IRAs

If you are not married filing jointly, your limit on contributions to traditional and Roth IRAs is generally the smaller of $5,500 ($6,500 if age 50 or older at the end of 2014) or your taxable compensation (defined below).

If you are married filing jointly, your contribution limit is generally $5,500 ($6,500 if age 50 or older at the end of 2014) and your spouse's contribution limit is $5,500 ($6,500 if age 50 or older at the end of 2014) as well. But if the combined taxable compensation of both you and your spouse is less than $11,000 ($12,000 if one spouse is 50 or older at the end of 2014; $13,000 if both spouses are 50 or older at the end of 2014), see Kay Bailey Hutchison Spousal IRA Limit in Pub. 590-A for special rules.

This limit does not apply to employer contributions to a SEP or SIMPLE IRA.

Note. Rollovers, Roth IRA conversions, Roth IRA rollovers from qualified retirement plans and qualified reservist distributions do not affect your contribution limit.

CAUTION. The amount you can contribute to a Roth IRA may also be limited by your modified AGI (see Contributions, earlier, and the Maximum Roth IRA Contribution Worksheet, later).

Taxable compensation. Taxable compensation includes the following.

• Wages, salaries, tips, etc. If you received a distribution from a nonqualified deferred compensation plan or nongovernmental section 457 plan that is included in Form W-2, box 1, or in Form 1099-MISC, box 7, do not include that distribution in taxable compensation. The distribution should be shown in (a) Form W-2, box 11, (b) Form W-2, box 12, with code Z, or (c) Form 1099-MISC, box 15b. If it is not, contact your employer for the amount of the distribution.
• Nontaxable combat pay if you were a member of the U.S. Armed Forces.
• Self-employment income. If you are self-employed (a sole proprietor or a partner), taxable compensation is your net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by your deduction for contributions made on your behalf to retirement plans and the deductible part of your self-employment tax.
• Alimony and separate maintenance.

See What Is Compensation? under Who Can Open a Traditional IRA? in chapter 1 of Pub. 590-A for details.

Recharacterizations

Generally, you can recharacterize (correct) an IRA contribution, Roth IRA conversion, or a Roth IRA rollover from a qualified retirement plan by making a trustee-to-trustee transfer from one IRA to another type of IRA. Trustee-to-trustee transfers are made directly between financial institutions or within the same financial institution. You generally must make the transfer by the due date of your return (including extensions) and reflect it on your return. However, if you timely filed your return without making the transfer, you can make the transfer within 6 months of the due date of your return, excluding extensions. If necessary, file an amended return reflecting the transfer (see Amending Form 8606, later). Write "Filed pursuant to section 301.9100-2" on the amended return.

Reporting recharacterizations. Treat any recharacterized IRA contribution, Roth IRA conversion, or Roth IRA rollover from a qualified retirement plan as though the amount of the contribution, conversion, or rollover was originally contributed to the second IRA, not the first IRA. For the recharacterization, you must transfer the amount of the original contribution, conversion, or rollover plus any related earnings or less any related loss. In most cases, your IRA trustee or custodian figures the amount of the related earnings you must transfer. If you need to figure the related earnings, see How Do You Recharacterize a Contribution? in chapter 1 of Pub. 590-A. Treat any earnings or loss that occurred in the first IRA as having occurred in the second IRA. You cannot deduct any loss that occurred while the funds were in the first IRA. Also, you cannot take a deduction for a contribution to a traditional IRA if you later recharacterize the amount. The following discussion explains how to report the four different types of recharacterizations, including the statement that you must attach to your return explaining the recharacterization.

1. You made a contribution to a traditional IRA and later recharacterized part or all of it in a trustee-to-trustee transfer to a Roth IRA. If you recharacterized only part of the contribution, report the nondeductible traditional IRA portion of the remaining contribution, if any, on Form 8606, Part I. If you recharacterized the entire contribution, do not report the contribution on Form 8606. In either case, attach a statement to your return explaining the recharacterization. If the recharacterization occurred in 2014, include the amount transferred from the traditional IRA on Form 1040, line 15a; Form 1040A, line 11a; or Form 1040NR, line 16a. If the recharacterization occurred in 2015, report the amount transferred only in the attached statement, and not on your 2014 or 2015 tax return.

   Example. You are single, covered by an employer retirement plan, and you contributed $4,000 to a new traditional IRA on May 27, 2014. On February 24, 2015, you determine that your 2014 modified AGI will limit your traditional IRA deduction to $1,000. The value of your traditional IRA on that date is $4,400. You decide to recharacterize $3,000 of the traditional IRA contribution as a Roth IRA contribution, and have $3,300 ($3,000 contribution plus $300 related earnings) transferred from your traditional IRA to a Roth IRA in a trustee-to-trustee transfer. You deduct the $1,000 traditional IRA contribution on Form 1040. You do not file Form 8606. You attach a statement to your return explaining the recharacterization. The statement indicates that you contributed $4,000 to a traditional IRA on May 27, 2014; recharacterized $3,000 of that contribution on February 24, 2015, by transferring $3,000 plus $300 of related earnings from your traditional IRA to a Roth IRA in a trustee-to-trustee transfer; and deducted the remaining traditional IRA contribution of $1,000 on Form 1040. You do not report the $3,300 distribution from your traditional IRA on your 2014 Form 1040 because the distribution occurred in 2015. You do not report the distribution on your 2015 Form 1040 because the recharacterization related to 2014 and was explained in an attachment to your 2014 return.

2. You made a contribution to a Roth IRA and later recharacterized part or all of it in a trustee-to-trustee transfer to a traditional IRA. Report the nondeductible traditional IRA portion of the recharacterized contribution, if any, on Form 8606, Part I. Do not report the Roth IRA contribution (whether or not you recharacterized all or part of it) on Form 8606. Attach a statement to your return explaining the recharacterization. If the recharacterization occurred in 2014, include the amount transferred from the Roth IRA on Form 1040, line 15a; Form 1040A, line 11a; or Form 1040NR, line 16a. If the recharacterization occurred in 2015, report the amount transferred only in the attached statement, and not on your 2014 or 2015 tax return.

   Example. You are single, covered by an employer retirement plan, and you contributed $4,000 to a new Roth IRA on June 16, 2014. On December 29, 2014, you determine that your 2014 modified AGI will allow a full traditional IRA deduction. You decide to recharacterize the Roth IRA contribution as a traditional IRA contribution and have $4,200, the balance in the Roth IRA account ($4,000 contribution plus $200 related earnings), transferred from your Roth IRA to a traditional IRA in a trustee-to-trustee transfer. You deduct the $4,000 traditional IRA contribution on Form 1040. You do not file Form 8606. You attach a statement to your return explaining the recharacterization. The statement indicates that you contributed $4,000 to a new Roth IRA on June 16, 2014; recharacterized that contribution on December 29, 2014, by transferring $4,200, the balance in the Roth IRA, to a traditional IRA in a trustee-to-trustee transfer; and deducted the traditional IRA contribution of $4,000 on Form 1040. You include the $4,200 distribution from your Roth IRA on your 2014 Form 1040, line 15a.

3. You converted an amount from a traditional, SEP, or SIMPLE IRA to a Roth IRA in 2014 and later recharacterized all or part of the amount in a trustee-to-trustee transfer to a traditional, SEP, or SIMPLE IRA. If you recharacterized only part of the amount converted, report the amount not recharacterized on Form 8606, Part II. If you recharacterized the entire amount converted, do not report the conversion on Form 8606. In either case, attach a statement to your return explaining the recharacterization and include the amount converted (whether or not recharacterized) in the total on Form 1040, line 15a; Form 1040A, line 11a; or Form 1040NR, line 16a. If the recharacterization occurred in 2014, also include the amount transferred out from the Roth IRA on that line. If the recharacterization occurred in 2015, report the amount transferred only in the attached statement, and not on your 2014 or 2015 tax return (a 2015 Form 1099-R should be sent to you by January 31, 2016, stating that you made a recharacterization of an amount converted in the prior year).

   Example. You are married filing jointly and converted $20,000 from your traditional IRA to a new Roth IRA on May 20, 2014. On April 7, 2015, you decide to recharacterize the conversion. The value of the Roth IRA on that date is $19,000. You recharacterize the conversion by transferring that entire amount to a traditional IRA in a trustee-to-trustee transfer. You report $20,000 on Form 1040, line 15a. You do not include the $19,000 on line 15a because it did not occur in 2014 (you also do not report that amount on your 2015 return because it does not apply to the 2015 tax year). You attach a statement to Form 1040 explaining that (a) you made a conversion of $20,000 from a traditional IRA on May 20, 2014, and (b) you recharacterized the entire amount, which was then valued at $19,000, back to a traditional IRA on April 7, 2015.

4. You rolled over an amount from a qualified retirement plan to a Roth IRA in 2014 and later recharacterized all or part of the amount in a trustee-to-trustee transfer to a traditional IRA. Do not report the rollover (whether or not you recharacterized all or part of it) or the recharacterization on Form 8606. Attach a statement to your return explaining the recharacterization and include the amount of the original rollover on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. If the recharacterization occurred in 2014, also include the amount transferred from the Roth IRA on Form 1040, line 15a; Form 1040A, line 11a; or Form 1040NR, line 16a. If the recharacterization occurred in 2015, report the amount transferred from the Roth IRA only in the attached statement, and not on your 2014 or 2015 tax return (a 2015 Form 1099-R should be sent to you by January 31, 2016, stating that you made a recharacterization of an amount in the prior year).

   Example. You are single and you rolled over $50,000 from your 401(k) plan to a new Roth IRA on July 20, 2014. On March 25, 2015, you decide to recharacterize the rollover. The value of the Roth IRA on that date is $49,000. You recharacterize the rollover by transferring that entire amount to a traditional IRA in a trustee-to-trustee transfer. You report $50,000 on Form 1040, line 16a. You do not include the $49,000 on line 15a because the transfer to the traditional IRA did not occur in 2014 (you also do not report that amount on your 2015 return because the recharacterization does not apply to the 2015 tax year). You do not file Form 8606. You attach a statement to Form 1040 explaining that (a) you made a rollover of $50,000 from a 401(k) plan to a Roth IRA on July 20, 2014, and (b) you recharacterized the entire amount, which was then valued at $49,000, to a traditional IRA on March 25, 2015.

Return of IRA Contributions

If, in 2014 or 2015, you made traditional IRA contributions or Roth IRA contributions for 2014 and you had those contributions returned to you with any related earnings (or minus any loss) by the due date (including extensions) of your 2014 tax return, the returned contributions are treated as if they were never contributed. Do not report the contribution or distribution on Form 8606 or take a deduction for the contribution. However, you must include the amount of the distribution of the returned contributions you made in 2014 and any related earnings on your 2014 Form 1040, line 15a; Form 1040A, line 11a; or Form 1040NR, line 16a. Also include the related earnings on your 2014 Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b. Attach a statement explaining the distribution. You cannot deduct any loss that occurred (see Pub. 590-B for an exception if you withdrew the entire amount in all your traditional or Roth IRAs). Also, if you were under age 59½ at the time of a distribution with related earnings, you generally are subject to the additional 10% tax on early distributions (see Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts).

If you timely filed your 2014 tax return without withdrawing a contribution that you made in 2014, you can still have the contribution returned to you within 6 months of the due date of your 2014 tax return, excluding extensions. If you do, file an amended return with "Filed pursuant to section 301.9100-2" written at the top. Report any related earnings on the amended return and include an explanation of the withdrawn contribution. Make any other necessary changes on the amended return (for example, if you reported the contributions as excess contributions on your original return, include an amended Form 5329 reflecting that the withdrawn contributions are no longer treated as having been contributed).

In most cases, the related earnings that you must withdraw are figured by your IRA trustee or custodian. If you need to figure the related earnings on IRA contributions that were returned to you, see Contributions Returned Before Due Date of Return in chapter 1 of Pub. 590-A. If you made a contribution or distribution while the IRA held the returned contribution, see Pub. 590-A.

If you made a contribution for 2013 and you had it returned to you in 2014 as described above, do not report the distribution on your 2014 tax return. Instead, report it on your 2013 original or amended return in the manner described above.

Example. On May 28, 2014, you contributed $4,000 to your traditional IRA. The value of the IRA was $18,000 prior to the contribution. On December 29, 2014, when you are age 57 and the value of the IRA is $23,600, you realize you cannot make the entire contribution because your taxable compensation for the year will be only $3,000. You decide to have $1,000 of the contribution returned to you and withdraw $1,073 from your IRA ($1,000 contribution plus $73 earnings). You did not make any other withdrawals or contributions. You do not file Form 8606. You deduct the $3,000 remaining contribution on Form 1040. You include $1,073 on Form 1040, line 15a, and $73 on line 15b. You attach a statement to your tax return explaining the distribution. Because you properly removed the excess contribution with the related earnings by the due date of your tax return, you are not subject to the additional 6% tax on excess contributions, reported on Form 5329. However, because you were under age 59½ at the time of the distribution, the $73 of earnings is subject to the additional 10% tax on early distributions. You include $7.30 on Form 1040, line 59.

Return of Excess Traditional IRA Contributions

The return (distribution) in 2014 of excess traditional IRA contributions for years prior to 2014 is not taxable if all three of the following apply.

1. The distribution was made after the due date, including extensions, of your tax return for the year for which the contribution was made (if the distribution was made earlier, see Return of IRA Contributions above).
2. No deduction was allowable (without regard to the modified AGI limitation) or taken for the excess contributions.
3. The total contributions (excluding rollovers) to your traditional and SEP IRAs for the year for which the excess contributions were made did not exceed the amounts shown in the following table.

If the excess contribution to your traditional IRA for the year included a rollover and the excess occurred because the information the plan was required to give you was incorrect, increase the contribution limit amount for the year shown in the table above by the amount of the excess that is due to the incorrect information.

If the total contributions for the year included employer contributions to a SEP IRA, increase the contribution limit amount for the year shown in the table above by the smaller of the amount of the employer contributions.

Include the total amount distributed on Form 1040, line 15a; Form 1040A, line 11a; or Form 1040NR, line 16a; and attach a statement to your return explaining the distribution. See Example, later.

If you meet these conditions and are otherwise required to file Form 8606:

• Do not take into account the amount of the withdrawn contributions in figuring line 2 (for 2014 or for any later year), and
• Do not include the amount of the withdrawn contributions on line 7.

Example. You are single, you retired in 2011, and you had no taxable compensation after 2011. However, you made traditional IRA contributions (that you did not deduct) of $3,000 in 2012 and $4,000 in 2013. In November 2014, a tax practitioner informed you that you had made excess contributions for those years because you had no taxable compensation. You withdrew the $7,000 and filed amended returns for 2012 and 2013 reflecting the additional 6% tax on excess contributions on Form 5329. You include the $7,000 distribution on your 2014 Form 1040, line 15a, enter -0- on line 15b, and attach a statement to your return explaining the distribution, including the fact that you filed amended returns for 2012 and 2013 and paid the additional 6% tax on the excess contributions for those years. The statement indicates that the distribution is not taxable because (a) it was made after the due dates of your 2012 and 2013 tax returns, including extensions, (b) your total IRA contributions for 2012 did not exceed $5,000 ($6,000 if age 50 or older at the end of 2012) and your total IRA contributions for 2013 did not exceed $5,500 ($6,500 if age 50 or older at the end of 2013), and (c) you did not take a deduction for the contributions, and no deduction was allowable because you did not have any taxable compensation for those years. The statement also indicates that the distribution reduced your excess contributions to -0-, as reflected on your 2014 Form 5329. Do not file Form 8606 for 2014. If you are required to file Form 8606 in a year after 2014, do not include the $7,000 you withdrew in 2014 on line 2.

Amending Form 8606

Generally, after you file your return, you can change a nondeductible contribution to a traditional IRA to a deductible contribution or vice versa if you make the change within the time limit for filing Form 1040X, Amended U.S. Individual Income Tax Return (see When To File in the Form 1040X Instructions). You also may be able to make a recharacterization (discussed earlier). If necessary, complete a new Form 8606 showing the revised information and file it with Form 1040X.

Penalty for Not Filing

If you are required to file Form 8606 to report a nondeductible contribution to a traditional IRA for 2014, but do not do so, you must pay a $50 penalty, unless you can show reasonable cause.

Overstatement Penalty

If you overstate your nondeductible contributions, you must pay a $100 penalty, unless you can show reasonable cause.

What Records Must I Keep?

To verify the nontaxable part of distributions from your IRAs, including Roth IRAs, keep a copy of the following forms and records until all distributions are made.

• Page 1 of Forms 1040 (or Forms 1040A, 1040NR, or 1040-T) filed for each year you made a nondeductible contribution to a traditional IRA.
• Forms 8606 and any supporting statements, attachments, and worksheets for all applicable years.
• Forms 5498, IRA Contribution Information, or similar statements you received each year showing contributions you made to a traditional IRA or Roth IRA.
• Forms 5498 or similar statements you received showing the value of your traditional IRAs for each year you received a distribution.
• Forms 1099-R or W-2P you received for each year you received a distribution.

Note. Forms 1040-T and W-2P are forms that were used in prior years.

Specific Instructions

Name and social security number (SSN). If you file a joint return, enter only the name and SSN of the spouse whose information is being reported on Form 8606. If both you and your spouse are required to file Form 8606, file a separate Form 8606 for each of you.

Part I - Nondeductible Contributions to Traditional IRAs and Distributions From Traditional, SEP, and SIMPLE IRAs

Line 1

If you used the IRA Deduction Worksheet in the Form 1040, 1040NR, or 1040A instructions, subtract line 12 (line 10 for Form 1040A) of the worksheet (or the amount you chose to deduct on Form 1040 or Form 1040NR, line 32, or Form 1040A, line 17, if less) from the smaller of line 10 or line 11 (line 8 or line 9 for Form 1040A) of the worksheet. Enter the result on line 1 of Form 8606. You cannot deduct the amount included on line 1.

If you used the worksheet Figuring Your Reduced IRA Deduction for 2014 in Pub. 590-A, enter on line 1 of Form 8606 any nondeductible contributions from the appropriate lines of that worksheet.

If you did not have any deductible contributions, you can make nondeductible contributions up to your contribution limit (see Overall Contribution Limit for Traditional and Roth IRAs, earlier). Enter on line 1 of Form 8606 your nondeductible contributions.

Include on line 1 any repayment of a qualified reservist distribution.

Do not include on line 1 contributions that you had returned to you with the related earnings (or less any loss). See Return of IRA Contributions, earlier.

Line 2

Generally, if this is the first year you are required to file Form 8606, enter -0-. Otherwise, use the Total Basis Chart, later, to find the amount to enter on line 2.

However, you may need to enter an amount that is more than -0- (even if this is the first year you are required to file Form 8606) or increase or decrease the amount from the chart if your basis changed because of any of the following.

• You had a return of excess traditional IRA contributions (see Return of Excess Traditional IRA Contributions, earlier).
• Incident to divorce, you transferred or received part or all of a traditional IRA (see the last bulleted item under Line 7, later).
• You rolled over any nontaxable portion of your qualified retirement plan to a traditional or SEP IRA that was not previously reported on Form 8606, line 2. Include the nontaxable portion on line 2.

Total Basis Chart

Line 4

If you made contributions to traditional IRAs for 2014 in 2014 and 2015 and you have both deductible and nondeductible contributions, you can choose to treat the contributions made in 2014 first as nondeductible contributions and then as deductible contributions, or vice versa.

Example. You made contributions for 2014 of $2,000 in May 2014 and $2,000 in January 2015, of which $3,000 are deductible and $1,000 are nondeductible. You choose $1,000 of your contribution in 2014 to be nondeductible. You enter the $1,000 on line 1, but not line 4, and it becomes part of your basis for 2014.

Although the contributions to traditional IRAs for 2014 that you made from January 1, 2015, through April 15, 2015, can be treated as nondeductible, they are not included in figuring the nontaxable part of any distributions you received in 2014.

Line 6

Enter the total value of all your traditional, SEP, and SIMPLE IRAs as of December 31, 2014, plus any outstanding rollovers. A statement should be sent to you by January 31, 2015, showing the value of each IRA on December 31, 2014. However, if you recharacterized any amounts originally contributed, converted, or rolled over from a qualified plan in 2014, enter on line 6 the total value, taking into account all recharacterizations of those amounts, including recharacterizations made after December 31, 2014.

For purposes of line 6, a rollover is a tax-free distribution from one traditional, SEP, or SIMPLE IRA that is contributed to another traditional, SEP, or SIMPLE IRA. The rollover must be completed within 60 days after receiving the distribution from the first IRA. An outstanding rollover is generally the amount of any distribution received in 2014 after November 1, 2014, that was rolled over in 2015, but within the 60-day rollover period.

The IRS may waive the 60-day requirement if failing to waive it would be against equity or good conscience, such as situations where a casualty, disaster, or other events beyond your reasonable control prevented you from meeting the 60-day requirement. Also, the 60-day period will be extended for certain frozen deposits. See Can You Move Retirement Plan Assets? in chapter 1 of Pub. 590-A for details.

Note. Do not include a rollover from a traditional, SEP, or SIMPLE IRA to a qualified retirement plan even if it was an outstanding rollover.

Line 7

CAUTION. If you received a distribution in 2014 from a traditional, SEP, or SIMPLE IRA, and you also made contributions for 2014 to a traditional IRA that may not be fully deductible because of the income limits, you must make a special computation before completing the rest of this form. For details, including how to complete Form 8606, see Are Distributions Taxable? in chapter 1 of Pub. 590-B.

Do not include any of the following on line 7.

• Distributions that you converted to a Roth IRA.
• Recharacterizations of traditional IRA contributions to Roth IRA contributions.
• Distributions you rolled over to another traditional, SEP, or SIMPLE IRA (whether or not the distribution is an outstanding rollover included on line 6).
• Distributions you rolled over to a qualified retirement plan.
• A one-time distribution to fund an HSA. For details, see Pub. 969, Health Savings Accounts and Other Tax-Favored Health Plans.
• Distributions that are treated as a return of contributions under Return of IRA Contributions, earlier.
• Qualified charitable distributions (QCDs). For details, see Are Distributions Taxable? in chapter 1 of Pub. 590-B.
• Distributions that are treated as a return of excess contributions under Return of Excess Traditional IRA Contributions, earlier.
• Distributions that are incident to divorce. The transfer of part or all of your traditional, SEP, or SIMPLE IRA to your spouse under a divorce or separation agreement is not taxable to you or your spouse. If this transfer results in a change in the basis of the traditional IRA of either spouse, both spouses must file Form 8606 and show the increase or decrease in the amount of basis on line 2. Attach a statement explaining this adjustment. Include in the statement the character of the amounts in the traditional IRA, such as the amount attributable to nondeductible contributions. Also, include the name and social security number of the other spouse.

Line 8

If, in 2014, you converted any amounts from traditional, SEP, or SIMPLE IRAs to a Roth IRA, enter on line 8 the net amount you converted. To figure that amount, subtract from the total amount converted in 2014 any portion that you recharacterized back to traditional, SEP, or SIMPLE IRAs in 2014 or 2015 (see Recharacterizations, earlier). Do not take into account related earnings that were transferred with the recharacterized amount or any loss that occurred while the amount was in the Roth IRA. See item (3) under Reporting recharacterizations, earlier, for details.

Line 15

If you were under age 59½ at the time you received distributions from your traditional, SEP, or SIMPLE IRA, there generally is an additional 10% tax on the portion of the distribution that is included in income (25% for a distribution from a SIMPLE IRA during the first 2 years of your participation in the plan). See the instructions for Form 1040, line 59, or the instructions for Form 1040NR, line 57.

Part II - 2014 Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs

Complete Part II if you converted part or all of your traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2014, excluding any portion you recharacterized. See item (3) under Reporting recharacterizations, earlier, for details.

Limit on number of conversions. If you converted an amount from a traditional, SEP, or SIMPLE IRA to a Roth IRA in 2014 and then recharacterized the amount back to a traditional, SEP, or SIMPLE IRA, you cannot reconvert that amount until the later of January 1, 2015, or 30 days after the recharacterization. See Can You Move Retirement Plan Assets? in chapter 1 of Pub. 590-A for details.

Line 16

If you did not complete line 8, see the instructions for that line. Then, enter on line 16 the amount you would have entered on line 8 had you completed it.

Line 17

If you did not complete line 11, enter on line 17 the amount from line 2 (or the amount you would have entered on line 2 if you had completed that line) plus any contributions included on line 1 that you made before the conversion.

Line 18

If your entry on line 18 is zero or less, do not include the result on Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b. Include the full amount of the distribution on Form 1040, line 15a; Form 1040A, line 11a; or Form 1040NR, line 16a.

Part III - Distributions From Roth IRAs

Complete Part III to figure the taxable part, if any, of your 2014 Roth IRA distributions.

Line 19

Do not include on line 19 any of the following.

• Distributions that you rolled over, including distributions made in 2014 and rolled over after December 31, 2014 (outstanding rollovers).
• Recharacterizations.
• Distributions that are a return of contributions under Return of IRA Contributions, earlier.
• Distributions made on or after age 59½ if you made a contribution (including a conversion) for any year from 1998 through 2009.
• A one-time distribution to fund an HSA. For details, see Pub. 969.
• Qualified charitable distributions (QCDs). For details, see Are Distributions Taxable? in chapter 1 of Pub. 590-B.
• Distributions made upon death or due to disability if a contribution was made (including a conversion) for any year from 1998 through 2009.
• Distributions that are incident to divorce. The transfer of part or all of your Roth IRA to your spouse under a divorce or separation agreement is not taxable to you or your spouse.

If, after considering the items above, you do not have an amount to enter on line 19, do not complete Part III; your Roth IRA distribution(s) is not taxable. Instead, include your total Roth IRA distribution(s) on Form 1040, line 15a; Form 1040A, line 11a; or Form 1040NR, line 16a.

Line 20

If you had a qualified first-time homebuyer distribution from your Roth IRA and you made a contribution (including a conversion) to a Roth IRA for any year from 1998 through 2009, enter the amount of your qualified expenses on line 20, but do not enter more than $10,000. For details, see Are Distributions Taxable? in chapter 2 of Pub. 590-B.

Line 22

Figure the amount to enter on line 22 as follows.

• If you did not take a Roth IRA distribution before 2014 (other than an amount rolled over or recharacterized or a returned contribution), enter on line 22 the total of all your regular contributions to Roth IRAs for 1998 through 2014 (excluding rollovers from other Roth IRAs and any contributions that you had returned to you), adjusted for any recharacterizations.
• If you did take such a distribution before 2014, see the Basis in Regular Roth IRA Contributions Worksheet - Line 22, later, to figure the amount to enter.
• Increase the amount on line 22 by any amount rolled in from a designated Roth account that is treated as investment in the contract.
• Increase or decrease the amount on line 22 by any basis in regular contributions received or transferred incident to divorce. Also attach a statement similar to the one explained in the last bulleted item under Line 7, earlier.
• Increase the amount on line 22 by the amounts received as a military gratuity or SGLI payment that was rolled over to your Roth IRA.
• Increase the amount on line 22 by any amount received as qualified settlement income in connection with the Exxon Valdez litigation and rolled over to your Roth IRA.
• Increase the amount on line 22 by any "airline payments" you received as a result of your employment with an airline that you rolled over to your Roth IRA. However, do not include the amounts attributable to airline payments that you transferred from a Roth IRA to a traditional IRA because of the FAA Modernization and Reform Act of 2012.

Line 23

Generally, there is an additional 10% tax on 2014 distributions from a Roth IRA that are shown on line 23. The additional tax is figured on Form 5329, Part I. See the instructions for Form 5329, line 1, for details and exceptions.

Line 24

Figure the amount to enter on line 24 as follows.

• If you have never made a Roth IRA conversion or rolled over an amount from a qualified retirement plan to a Roth IRA, enter -0- on line 24.
• If you took a Roth IRA distribution (other than an amount rolled over or recharacterized or a returned contribution) before 2014 in excess of your basis in regular Roth IRA contributions, see the Basis in Roth IRA Conversions and Rollovers From Qualified Retirement Plans to Roth IRAs - Line 24 chart, later, to figure the amount to enter on line 24.
• If you did not take such a distribution before 2014, enter on line 24 the total of all your conversions to Roth IRAs (other than amounts recharacterized). These amounts are shown on line 14c of your 1998, 1999, and 2000 Forms 8606 and line 16 of your 2001 through 2014 Forms 8606. Also include on line 24 any amounts rolled over from a qualified retirement plan to a Roth IRA for 2008, 2009, and 2011 to 2014 reported on your Form 1040, Form 1040A, or Form 1040NR, and line 21 of your 2010 Form 8606.
• Increase or decrease the amount on line 24 by any basis in conversions to Roth IRAs and amounts rolled over from a qualified retirement plan to a Roth IRA received or transferred incident to divorce. Also attach a statement similar to the one explained in the last bulleted item under Line 7, earlier.

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