Instructions For Form 8606 - Nondeductible Iras

spouse’s contribution limit is $4,000

the transfer within 6 months of the

Example. You are married filing

($4,500 if age 50 or older at the end

due date of your return, excluding

jointly and converted $20,000 from

of 2005) as well. But if the combined

extensions. If necessary, file an

your traditional IRA to a new Roth

taxable compensation of both you

amended return reflecting the transfer

IRA on May 20, 2005. On April 7,

and your spouse is less than $8,000

(see page 5). Write “Filed pursuant to

2006, you determine that your 2005

($8,500 if one spouse is 50 or older

section 301.9100-2” on the amended

modified AGI for Roth IRA purposes

at the end of 2005; $9,000 if both

return.

will exceed $100,000, and you are

spouses are 50 or older at the end of

not allowed to make a Roth IRA

Reporting recharacterizations. Any

2005), see Pub. 590 for special rules.

conversion. The value of the Roth

recharacterized conversion will be

This limit does not apply to employer

IRA on that date is $19,000. You

treated as though the conversion had

contributions to a SEP or SIMPLE

recharacterize the conversion by

not occurred. Any recharacterized

IRA.

transferring that entire amount to a

contribution will be treated as having

traditional IRA in a trustee-to-trustee

The amount you can

been originally contributed to the

transfer. You report $20,000 on Form

contribute to a Roth IRA may

second IRA, not the first IRA. The

1040, line 15a. You do not include

also be limited by your

amount transferred must include

CAUTION

the $19,000 on line 15a because it

modified AGI (see Contributions and

related earnings or be reduced by

did not occur in 2005 (you also do not

the Maximum Roth IRA Contribution

any loss. In most cases, the related

report that amount on your 2006

Worksheet on page 2).

earnings that you must transfer are

return because it does not apply to

figured by your IRA trustee or

Taxable compensation includes

the 2006 tax year). You attach a

custodian. If you need to figure the

the following.

statement to Form 1040 explaining

•

related earnings, see How Do You

Wages, salaries, tips, etc. If you

that (a) you made a conversion of

Recharacterize a Contribution in Pub.

received a distribution from a

$20,000 from a traditional IRA on

590. Any earnings or loss that

nonqualified deferred compensation

May 20, 2005, (b) you

occurred in the first IRA will be

plan or nongovernmental section 457

recharacterized the entire amount,

treated as having occurred in the

plan that is included in Form W-2, box

which was then valued at $19,000,

second IRA. You cannot deduct any

1, or in Form 1099-MISC, box 7, do

back to a traditional IRA on April 7,

loss that occurred while the funds

not include that distribution in taxable

2006, and (c) you recharacterized

were in the first IRA. Also, you cannot

compensation. The distribution

because your 2005 modified AGI for

take a deduction for a contribution to

should be shown in (a) Form W-2,

Roth IRA purposes exceeded

a traditional IRA if the amount is later

box 11, (b) Form W-2, box 12, with

$100,000.

recharacterized. See below for how to

code Z, or (c) Form 1099-MISC, box

2. You made a contribution to a

report the three different types of

15b. If it is not, contact your employer

traditional IRA and later

recharacterizations, including the

for the amount of the distribution.

recharacterized part or all of it to a

•

statement that must be attached to

Self-employment income. If you are

Roth IRA. If you recharacterized only

your return explaining the

self-employed (a sole proprietor or a

part of the contribution, report the

recharacterization.

partner), taxable compensation is

nondeductible traditional IRA portion

your net earnings from your trade or

1. You converted an amount from

of the remaining contribution, if any,

business (provided your personal

a traditional, SEP, or SIMPLE IRA to

on Form 8606, Part I. If you

services are a material

a Roth IRA in 2005 and later

recharacterized the entire

income-producing factor) reduced by

recharacterized all or part of the

contribution, do not report the

your deduction for contributions made

amount back to a traditional, SEP, or

contribution on Form 8606. In either

on your behalf to retirement plans

SIMPLE IRA. If you only

case, attach a statement to your

and the deduction allowed for

recharacterized part of the amount

return explaining the

one-half of your self-employment tax.

converted, report the amount not

•

recharacterization. If the

Alimony and separate

recharacterized on Form 8606. If you

recharacterization occurred in 2005,

maintenance.

recharacterized the entire amount, do

include the amount transferred from

not report the recharacterization on

See Pub. 590 for details.

the traditional IRA on Form 1040, line

Form 8606. In either case, attach a

15a; Form 1040A, line 11a; or Form

Note. Rollovers and Roth IRA

statement to your return explaining

1040NR, line 16a. If the

conversions do not affect your

the recharacterization and include the

contribution limit.

recharacterization occurred in 2006,

amount converted from the

report the amount transferred only in

traditional, SEP, or SIMPLE IRA in

Recharacterizations

the attached statement.

the total on Form 1040, line 15a;

Example. You are single, covered

Generally, you can recharacterize

Form 1040A, line 11a; or Form

by a retirement plan, and you

(correct) an IRA contribution or Roth

1040NR, line 16a. If the

contributed $4,000 to a new

IRA conversion by making a

recharacterization occurred in 2005,

traditional IRA on May 27, 2005. On

trustee-to-trustee transfer from one

also include the amount transferred

February 24, 2006, you determine

IRA to another type of IRA.

back from the Roth IRA on that line. If

that your 2005 modified AGI will limit

Trustee-to-trustee transfers are made

the recharacterization occurred in

your traditional IRA deduction to

2006, report the amount transferred

directly between financial institutions

$1,000. The value of your traditional

or within the same financial

only in the attached statement, and

IRA on that date is $4,400. You

institution. You generally must make

not on your 2005 or 2006 tax return

decide to recharacterize $3,000 of the

the transfer by the due date of your

(a 2006 Form 1099-R should be sent

return (including extensions) and

to you by January 31, 2007, stating

traditional IRA contribution as a Roth

reflect it on your return. However, if

that you made a recharacterization of

IRA contribution, and have $3,300

you timely filed your return without

an amount converted in the prior

($3,000 contribution plus $300 related

year).

making the transfer, you can make

earnings) transferred from your

-3-

Instructions For Form 8606 - Nondeductible Iras - 2005 Page 3

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