Instructions For Form 8606 - Nondeductible Iras

traditional IRA to a Roth IRA in a

indicates that you contributed $4,000

In most cases, the related earnings

trustee-to-trustee transfer. You

to a new Roth IRA on June 14, 2005;

that you must withdraw are figured by

deduct the $1,000 traditional IRA

recharacterized that contribution on

your IRA trustee or custodian. If you

December 27, 2005, by transferring

contribution on Form 1040. You are

need to figure the related earnings on

$4,200, the balance in the Roth IRA,

not required to file Form 8606, but

IRA contributions that were made in

to a traditional IRA in a

you must attach a statement to your

2004 or 2005 and were returned to

trustee-to-trustee transfer; and that

return explaining the

you, see Contributions Returned

$4,000 of the traditional IRA

recharacterization. The statement

Before Due Date of Return in Pub.

contribution is deducted on Form

indicates that you contributed $4,000

590. If you made a contribution or

1040. You include the $4,200

to a traditional IRA on May 27, 2005;

distribution while the IRA held the

distribution on your 2005 Form 1040,

recharacterized $3,000 of that

returned contribution, see Notice

line 15a.

contribution on February 24, 2006, by

2000-39. You can find Notice

transferring $3,000 plus $300 of

2000-39 on page 132 of Internal

related earnings from your traditional

Return of IRA

Revenue Bulletin 2000-30 at

IRA to a Roth IRA in a

Contributions

trustee-to-trustee transfer; and that all

$1,000 of the remaining traditional

If, in 2005, you made traditional IRA

If you made a contribution in 2004

IRA contribution is deducted on Form

contributions or Roth IRA

and you had it returned to you in

1040. You do not report the $3,300

contributions for 2004 or 2005 and

2005 as described above, do not

distribution from your traditional IRA

you had those contributions returned

report the distribution on your 2005

on your 2005 Form 1040 because the

to you with any related earnings (or

tax return. Instead, report it on your

distribution occurred in 2006. You do

less any loss) by the due date

2004 original or amended return in

not report the distribution on your

(including extensions) of your 2005

the manner described above.

2006 Form 1040 because the

tax return, the returned contributions

Likewise, report on your 2006 tax

recharacterization related to 2005

are treated as if they were never

and was explained in an attachment

return any distribution made in 2006

contributed. Do not report the

to your 2005 return.

that is a return of contributions that

contribution or distribution on Form

were made in 2006 for 2005 (but be

3. You made a contribution to a

8606 or take a deduction for the

Roth IRA and later recharacterized

sure that your original or amended

contribution. However, you must

part or all of it to a traditional IRA.

2005 tax return reflects that the

report the distribution and any related

Report the nondeductible traditional

contribution is treated as not having

earnings on your 2005 Form 1040,

IRA portion, if any, on Form 8606,

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

been contributed).

Part I. If you did not recharacterize

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

the entire contribution, do not report

16a and 16b. Attach a statement

Example. On May 31, 2005, you

the remaining Roth IRA portion of the

explaining the distribution. You

contributed $4,000 to your traditional

contribution on Form 8606. Attach a

cannot deduct any loss that occurred

IRA. The value of the IRA was

statement to your return explaining

(see Pub. 590 for an exception if you

$18,000 prior to the contribution. On

the recharacterization. If the

withdrew the entire amount in all your

December 29, 2005, when you are

recharacterization occurred in 2005,

traditional or Roth IRAs). Also, if you

age 57 and the value of the IRA is

include the amount transferred from

were under age 59

at the time of a

$23,600, you realize you cannot

the Roth IRA on Form 1040, line 15a;

distribution with related earnings, you

make the entire contribution because

Form 1040A, line 11a; or Form

generally are subject to the additional

your taxable compensation for the

1040NR, line 16a. If the

10% tax on early distributions (see

year will be only $3,000. You decide

recharacterization occurred in 2006,

Form 5329, Additional Taxes on

to have $1,000 of the contribution

report the amount transferred only in

Qualified Plans (Including IRAs) and

returned to you and withdraw $1,076

the attached statement, and not on

Other Tax-Favored Accounts).

from your IRA ($1,000 contribution

your 2005 or 2006 tax return.

If you timely filed your 2005 tax

plus $76 earnings). You did not make

Example. You are single and

return without withdrawing a

any other withdrawals or

contributed $4,000 to a new Roth IRA

contribution that you made in 2005,

contributions. You are not required to

on June 14, 2005. On December 27,

you can still have the contribution

file Form 8606. You deduct the

2005, you determine that your 2005

returned to you within 6 months of the

$3,000 remaining contribution on

modified AGI will allow a full

due date of your 2005 tax return,

Form 1040. You include $1,076 on

traditional IRA deduction. You decide

excluding extensions. If you do, file

Form 1040, line 15a, and $76 on line

to recharacterize the Roth IRA

an amended return with “Filed

15b. You attach a statement to your

contribution as a traditional IRA

pursuant to section 301.9100-2”

tax return explaining the distribution.

contribution and have $4,200, the

written at the top. Report any related

Because you properly removed the

balance in the Roth IRA account

earnings on the amended return and

excess contribution with the related

($4,000 contribution plus $200 related

include an explanation of the

earnings by the due date of your tax

earnings), transferred from your Roth

withdrawal. Make any other

return, you are not subject to the

IRA to a traditional IRA in a

necessary changes on the amended

additional 6% tax on excess

trustee-to-trustee transfer. You

return (for example, if you reported

contributions. However, because you

deduct the $4,000 traditional IRA

the contributions as excess

were under age 59

at the time of

contribution on Form 1040. You are

contributions on your original return,

the distribution, the $76 of earnings is

not required to file Form 8606, but

include an amended Form 5329

subject to the additional 10% tax on

you must attach a statement to your

reflecting that the withdrawn

early distributions. You include $7.60

return explaining the

contributions are no longer treated as

recharacterization. The statement

having been contributed).

on Form 1040, line 60.

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Instructions For Form 8606 - Nondeductible Iras - 2005 Page 4

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