Instructions For Form 8606 - Nondeductible Iras

2006

Department of the Treasury

Internal Revenue Service

Instructions for Form 8606

Nondeductible IRAs

Section references are to the Internal

or annuity under the plan (a deemed

Who Must File

IRA) to receive voluntary employee

Revenue Code unless otherwise noted.

File Form 8606 if any of the following

contributions. If in 2006 you had a

General Instructions

apply.

deemed IRA, use the rules for either a

•

You made nondeductible

traditional IRA or a Roth IRA depending

contributions to a traditional IRA for

on which type it was. See Pub. 590 for

What’s New

2006, including a repayment of a

more details.

qualified hurricane or reservist

IRA contribution limit increased. You

Traditional IRAs

distribution.

and your spouse, if filing jointly, may

•

You received distributions from a

each be able to contribute up to $5,000

For purposes of Form 8606, a

traditional, SEP, or SIMPLE IRA in

if age 50 or older at the end of 2006.

traditional IRA is an individual

2006 and your basis in traditional IRAs

See Overall Contribution Limit for

retirement account or an individual

is more than zero. For this purpose, a

Traditional and Roth IRAs that begins

retirement annuity other than a SEP,

distribution does not include a rollover

on page 2.

SIMPLE, or Roth IRA.

(other than a repayment of a qualified

Contributions. An overall contribution

hurricane distribution), qualified

Nontaxable combat pay. If you were

limit applies to traditional IRAs and

charitable distribution, conversion,

a member of the U.S. Armed Forces,

Roth IRAs. See Overall Contribution

recharacterization, or return of certain

any nontaxable combat pay you

Limit for Traditional and Roth IRAs that

contributions.

received is included in taxable

•

begins on page 2. Contributions to a

You converted an amount from a

compensation for purposes of

traditional IRA may be fully deductible,

traditional, SEP, or SIMPLE IRA to a

determining your IRA contribution limit.

partially deductible, or completely

Roth IRA in 2006 (unless you

See Overall Contribution Limit for

nondeductible.

recharacterized the entire conversion —

Traditional and Roth IRAs that begins

see page 3).

on page 2.

Basis. Your basis in traditional IRAs is

•

You received distributions from a

the total of all your nondeductible

This rule also applies for 2004 and

Roth IRA in 2006 (other than a rollover,

contributions to traditional IRAs minus

2005. To see if you can increase your

recharacterization, or return of certain

the total of all your nontaxable

IRA contribution limit for those years,

contributions — see page 7).

distributions, adjusted if necessary (see

see Pub. 590, Individual Retirement

Note. If you recharacterized a 2006

the instructions for line 2 on page 5).

Arrangements (IRAs).

Roth IRA contribution as a traditional

Keep track of your basis to figure the

IRA contribution, or vice versa, treat the

nontaxable part of your future

Purpose of Form

contribution as having been made to

distributions.

the second IRA, not the first IRA. See

Use Form 8606 to report:

page 3.

SEP IRAs

•

Nondeductible contributions you

made to traditional IRAs,

If you have any qualified

A simplified employee pension (SEP) is

•

hurricane distributions, complete

an employer-sponsored plan under

Distributions from traditional, SEP, or

Part I of Form 8915 before you

which an employer can make

SIMPLE IRAs, if you have ever made

CAUTION

complete Form 8606.

contributions to traditional IRAs for its

nondeductible contributions to

employees. If you make contributions to

traditional IRAs,

You do not have to file Form

•

that IRA (excluding employer

Distributions from Roth IRAs, and

TIP

8606 solely to report regular

contributions you make if you are

•

Conversions from traditional, SEP, or

contributions to Roth IRAs. But

self-employed), they are treated as

SIMPLE IRAs to Roth IRAs.

see What Records Must I Keep? on

contributions to a traditional IRA and

page 5.

may be deductible or nondeductible.

Additional information. See Pub.

SEP IRA distributions are reported in

590, for more details.

When and Where To File

the same manner as traditional IRA

File Form 8606 with your 2006 Form

distributions.

If you received distributions from

1040, 1040A, or 1040NR. If you are not

TIP

a traditional, SEP, or SIMPLE

SIMPLE IRAs

required to file an income tax return but

IRA in 2006 and you have never

are required to file Form 8606, sign

Your participation in your employer’s

made nondeductible contributions to

Form 8606 and send it to the Internal

SIMPLE IRA plan does not prevent you

traditional IRAs, do not report the

Revenue Service at the same time and

from making contributions to a

distributions on Form 8606. Instead,

place you would otherwise file Form

traditional, SEP, or Roth IRA.

see the instructions for Form 1040,

1040, 1040A, or 1040NR.

lines 15a and 15b; Form 1040A, lines

Roth IRAs

11a and 11b; or Form 1040NR, lines

Definitions

16a and 16b. Also, to find out if any of

A Roth IRA is similar to a traditional

your contributions to traditional IRAs

IRA, but has the following features.

Deemed IRAs

•

are deductible, see the instructions for

Contributions are never deductible.

•

Form 1040, line 32; Form 1040A, line

A qualified employer plan (retirement

Contributions can be made after the

17; or Form 1040NR, line 31.

plan) can maintain a separate account

owner reaches age 70

Cat. No. 25399E

Instructions For Form 8606 - Nondeductible Iras - 2006

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