2007 Form 8606
In looking at IRS Form 8606 and Instructions, it doesn’t really tell one to complete it under “Who Must File” when rolling over nontaxable amounts from a qualified plan. It does state that, however on page 5 of instructions, under “Line 2”, third bullet point. It would sure help to have that both on the Form itself and under “Who Must File”. No wonder so many miss the filing!
Permalink Submitted by Alan Spross on Thu, 2007-11-01 21:12
Yes, well these rollovers have only been available for 5 years 🙂
I predict the 8606 is going to become one of the real infamous tax forms:
1) Thousands of people have omitted filing them when they should and have to file them retroactively for up to two decades to document non deductible contributions.
2) Very few people are preserving the data they need to correctly report non qualified Roth distributions in Part III. They need a current tally of all their regular contributions less distributions, and the same for conversions in order to determine how much of a distribution is taxable, if any. Many people will have 20 years to search through the first time this becomes an issue.
3) And next year, the form will get more complex as it begins to address direct QRP to Roth IRA conversions, recharacterizations etc…
Permalink Submitted by Ronald Keller on Thu, 2013-12-26 22:31
I have filed form 8606 and know the basis in my non deductible ira account. What I don’t know is how to calculate the non taxable amount/percentage of my 2013 distribution. Please answer or direct me to the source of the proper calculation. Thanks
Permalink Submitted by Alan - IRA critic on Thu, 2013-12-26 23:03
The non taxable portion of any distribution you take is calculated on Form 8606, in fact the same Part I you used to report your non deductible contributions. Basically, you take your last 8606 that shows your accumulated basis from non deductible contributions and divide it by the adjusted year end gross value of all your non Roth IRA accounts to get the non taxable % to 3 decimal places. The adjustment to the year end value is made by adding back the amount of your distributions for the year and deduct out any contributions you made for the year after the end of the year. Get a copy of an 8606 and work through an example and make sure that the end result makes sense to you. The 8606 will also show the amount of basis remaining at year end to use in the future.