First Time 8606

Submitted by John Kollig on Fri, 2013-01-18 16:41

Hopefully I’m not repeating a topic, but I couldn’t find it by searching your site on “8606”.

Retired in 2010. Rolled over all 401(k)s to TIRA in early 2012. One 401(k) contained After Tax Contributions. After rollover, did partial conversion TIRA->Roth. No contributions have been made to the TIRA; no distribution outside of the Roth conversion have been taken.

Q1: For 2012 tax filing, do I only need to fill out Part II of 8086? Or, do I need to also fill out Part I to establish the basis to the IRS?

Q2: I understand how to pro rate the non-taxable portion of the conversion via 8086 (initial TIRA basis and value of all TIRA on 12/31). I assume, if I also do a partial conversion TIRA->Roth in 2013, then the non-taxable portion of that conversion is based on the “leftover” basis from last year’s conversion. Is this true??

Q3: I assume that each Roth conversion carries its own “5-year” countdown to become eligible for a Qualified Distribution. Is this true?

Thanks in advance – Jack



Submitted by Alan - IRA critic on Fri, 2013-01-18 19:44

  1. Q1)  You need to complete Part I to show the basis from the 401k on line 2 where it gets added to any previous basis you had. This part will also calculate the taxable portion of your conversion.
  2. Q2)  Correct. The 2012 8606 will show how much basis remains for use after 2012.
  3. Q3)  Each conversion has it’s own 5 year holding period to avoid the 10% penalty on the pre tax portion of the conversion if you withdraw before the 5 years is up or you reach 59.5. But a qualified distribution is different. Qualification of all your Roth accounts occurs when you reach 59.5 and also after 5 years has passed from the year of your first Roth contribution of any type (regular or conversion contribution).

Submitted by John Kollig on Fri, 2013-01-18 21:24

Thanks for the quick reply! One followup: If I make another partial TIRA->Roth conversion in 2013 (no contribution; no other distributions) what parts of 8606 need to be filled out next year?And, I’m already past 59.5, so it looks like I’ve only got one 5-year countdown. Correct?

Submitted by Alan - IRA critic on Fri, 2013-01-18 21:42

Yes, the only 5 year issue you have remaining is the 5 years that must pass from the year of your first Roth contribution. When that occurs your Roth is fully qualified and tax free. And you no longer would need an 8606 to report your Roth distributions. With respect to 2013 conversions and all future conversions UNTIL your TIRA is drained, you will need Parts I and II of Form 8606 to calculate the pro rated taxable amount of your conversions.

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