Instructions For Form 8606 - Nondeductible Iras

Overall Contribution Limit for

a qualified retirement plan by making a

Example. You are married filing

trustee-to-trustee transfer from one IRA

jointly and converted $20,000 from your

Traditional and Roth IRAs

to another type of IRA.

traditional IRA to a new Roth IRA on

If you are not married filing jointly, your

Trustee-to-trustee transfers are made

May 20, 2010. On April 7, 2011, you

limit on contributions to traditional and

directly between financial institutions or

decide to recharacterize the

Roth IRAs is the smaller of $5,000

within the same financial institution.

conversion. The value of the Roth IRA

($6,000 if age 50 or older at the end of

You generally must make the transfer

on that date is $19,000. You

2010) or your taxable compensation

by the due date of your return

recharacterize the conversion by

(defined below). If you are married filing

(including extensions) and reflect it on

transferring that entire amount to a

jointly, your contribution limit is

your return. However, if you timely filed

traditional IRA in a trustee-to-trustee

generally $5,000 ($6,000 if age 50 or

your return without making the transfer,

transfer. You report $20,000 on Form

older at the end of 2010) and your

you can make the transfer within 6

1040, line 15a. You do not include the

spouse’s contribution limit is $5,000

months of the due date of your return,

$19,000 on line 15a because it did not

($6,000 if age 50 or older at the end of

excluding extensions. If necessary, file

occur in 2010 (you also do not report

2010) as well. But if the combined

an amended return reflecting the

that amount on your 2011 return

taxable compensation of both you and

transfer (see page 5). Write “Filed

because it does not apply to the 2011

your spouse is less than $10,000

pursuant to section 301.9100-2” on the

tax year). You attach a statement to

($11,000 if one spouse is 50 or older at

amended return.

Form 1040 explaining that (a) you

the end of 2010; $12,000 if both

made a conversion of $20,000 from a

Reporting recharacterizations. Any

spouses are 50 or older at the end of

traditional IRA on May 20, 2010, and

2010), see Pub. 590 for special rules.

recharacterized conversion or Roth IRA

(b) you recharacterized the entire

This limit does not apply to employer

rollover from a qualified retirement plan

amount, which was then valued at

contributions to a SEP or SIMPLE IRA.

will be treated as though the conversion

$19,000, back to a traditional IRA on

or rollover had not occurred. Any

Note. Rollovers, Roth IRA

April 7, 2011.

recharacterized contribution will be

conversions, Roth IRA rollovers from

2. You made a contribution to a

treated as having been originally

qualified retirement plans, and

traditional IRA and later recharacterized

contributed to the second IRA, not the

repayments of qualified disaster

part or all of it to a Roth IRA. If you

first IRA. The amount transferred must

recovery assistance, qualified recovery

recharacterized only part of the

include related earnings or be reduced

assistance, and qualified reservist

contribution, report the nondeductible

by any loss. In most cases, the related

distributions do not affect your

traditional IRA portion of the remaining

earnings that you must transfer are

contribution limit.

contribution, if any, on Form 8606, Part

figured by your IRA trustee or

I. If you recharacterized the entire

The amount you can contribute

custodian. If you need to figure the

contribution, do not report the

to a Roth IRA may also be

related earnings, see How Do You

contribution on Form 8606. In either

limited by your modified AGI

CAUTION

Recharacterize a Contribution? in Pub.

case, attach a statement to your return

(see Contributions and the Maximum

590. Any earnings or loss that occurred

explaining the recharacterization. If the

Roth IRA Contribution Worksheet on

in the first IRA will be treated as having

recharacterization occurred in 2010,

page 2).

occurred in the second IRA. You

include the amount transferred from the

Taxable compensation includes the

cannot deduct any loss that occurred

traditional IRA on Form 1040, line 15a;

following.

while the funds were in the first IRA.

Form 1040A, line 11a; or Form

•

Wages, salaries, tips, etc. If you

Also, you cannot take a deduction for a

1040NR, line 16a. If the

received a distribution from a

contribution to a traditional IRA if the

recharacterization occurred in 2011,

nonqualified deferred compensation

amount is later recharacterized. The

report the amount transferred only in

plan or nongovernmental section 457

following discussion explains how to

the attached statement.

plan that is included in Form W-2, box

report the four different types of

Example. You are single, covered

1, or in Form 1099-MISC, box 7, do not

recharacterizations, including the

by a retirement plan, and you

include that distribution in taxable

statement that must be attached to your

contributed $4,000 to a new traditional

compensation. The distribution should

return explaining the recharacterization.

IRA on May 27, 2010. On February 24,

be shown in (a) Form W-2, box 11, (b)

1. You converted an amount from a

2011, you determine that your 2010

Form W-2, box 12, with code Z, or (c)

traditional, SEP, or SIMPLE IRA to a

modified AGI will limit your traditional

Form 1099-MISC, box 15b. If it is not,

Roth IRA in 2010 and later

IRA deduction to $1,000. The value of

contact your employer for the amount

recharacterized all or part of the

your traditional IRA on that date is

of the distribution.

amount back to a traditional, SEP, or

$4,400. You decide to recharacterize

•

Nontaxable combat pay if you were a

SIMPLE IRA. If you only

$3,000 of the traditional IRA

member of the U.S. Armed Forces.

recharacterized part of the amount

contribution as a Roth IRA contribution,

•

Self-employment income. If you are

converted, report the amount not

and have $3,300 ($3,000 contribution

self-employed (a sole proprietor or a

recharacterized on Form 8606. If you

plus $300 related earnings) transferred

partner), taxable compensation is your

recharacterized the entire amount, do

from your traditional IRA to a Roth IRA

net earnings from your trade or

not report the recharacterization on

in a trustee-to-trustee transfer. You

business (provided your personal

Form 8606. In either case, attach a

deduct the $1,000 traditional IRA

services are a material

statement to your return explaining the

contribution on Form 1040. You are not

income-producing factor) reduced by

recharacterization and include the

required to file Form 8606, but you

your deduction for contributions made

amount converted from the traditional,

must attach a statement to your return

on your behalf to retirement plans and

SEP, or SIMPLE IRA in the total on

explaining the recharacterization. The

the deduction allowed for one-half of

Form 1040, line 15a; Form 1040A, line

statement indicates that you contributed

your self-employment tax. Also, you

11a; or Form 1040NR, line 16a. If the

$4,000 to a traditional IRA on May 27,

must add back any self-employed

recharacterization occurred in 2010,

2010; recharacterized $3,000 of that

health insurance deduction you used in

also include the amount transferred

contribution on February 24, 2011, by

figuring the amount to enter on

back from the Roth IRA on that line. If

transferring $3,000 plus $300 of related

Schedule SE, line 3.

the recharacterization occurred in 2011,

earnings from your traditional IRA to a

•

Alimony and separate maintenance.

report the amount transferred only in

Roth IRA in a trustee-to-trustee

See Pub. 590 for details.

the attached statement, and not on

transfer; and that all $1,000 of the

your 2010 or 2011 tax return (a 2011

remaining traditional IRA contribution is

Recharacterizations

Form 1099-R should be sent to you by

deducted on Form 1040. You do not

Generally, you can recharacterize

January 31, 2012, stating that you

report the $3,300 distribution from your

(correct) an IRA contribution, Roth IRA

made a recharacterization of an amount

traditional IRA on your 2010 Form 1040

conversion, or a Roth IRA rollover from

converted in the prior year).

because the distribution occurred in

-3-

Instructions for Form 8606 (2010)

Instructions For Form 8606 - Nondeductible Iras - 2010 Page 3

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