Instructions For Form 8606 - Nondeductible Iras

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Self-employment income. If you are

recharacterizations, including the

recharacterized part or all of it to a

self-employed (a sole proprietor or a

statement that must be attached to

Roth IRA. If you recharacterized only

partner), taxable compensation is

your return explaining the

part of the contribution, report the

your net earnings from your trade or

recharacterization.

nondeductible traditional IRA portion

business (provided your personal

of the remaining contribution, if any,

1. You converted an amount from

services are a material

on Form 8606, Part I. If you

a traditional, SEP, or SIMPLE IRA to

income-producing factor) reduced by

recharacterized the entire

a Roth IRA in 2003 and later

your deduction for contributions made

contribution, do not report the

recharacterized all or part of the

on your behalf to retirement plans

contribution on Form 8606. In either

amount back to a traditional, SEP, or

and the deduction allowed for

case, attach a statement to your

SIMPLE IRA. If you only

one-half of your self-employment tax.

return explaining the

recharacterized part of the amount

•

Alimony and separate

recharacterization. If the

converted, report the amount not

maintenance.

recharacterization occurred in 2003,

recharacterized on Form 8606. If you

See Pub. 590 for details.

include the amount transferred from

recharacterized the entire amount, do

the traditional IRA on Form 1040, line

not report the recharacterization on

Note: Rollovers and Roth IRA

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

Form 8606. In either case, attach a

conversions do not affect your

1040NR, line 16a. If the

statement to your return explaining

contribution limit.

recharacterization occurred in 2004,

the recharacterization and include the

report the amount transferred only in

amount converted from the

Recharacterizations

the attached statement.

traditional, SEP, or SIMPLE IRA on

Generally, you may recharacterize

Form 1040, line 15a; Form 1040A,

Example. You are single, covered

(correct) an IRA contribution or Roth

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

by a retirement plan, and you

IRA conversion by making a

the recharacterization occurred in

contributed $3,000 to a new

trustee-to-trustee transfer from one

2003, also include the amount

traditional IRA on May 31, 2003. On

IRA to another type of IRA.

transferred back from the Roth IRA

February 24, 2004, you determine

Trustee-to-trustee transfers are made

on that line. If the recharacterization

that your 2003 modified AGI will limit

directly between financial institutions

occurred in 2004, report the amount

your traditional IRA deduction to

or within the same financial

transferred only in the attached

$1,000. The value of your traditional

institution. You generally must make

statement, and not on your 2003 or

IRA on that date is $3,300. You

the transfer by the due date of your

2004 tax return (a 2004 Form 1099-R

decide to recharacterize $2,000 of the

return (including extensions) and

should be sent to you by January 31,

traditional IRA contribution as a Roth

reflect it on your return. However, if

2005, stating that you made a

IRA contribution, and have $2,200

you timely filed your return without

recharacterization of an amount

($2,000 contribution plus $200 related

making the transfer, you still may

converted in the prior year).

earnings) transferred from your

make the transfer within 6 months of

Example. You are married filing

traditional IRA to a Roth IRA in a

the due date of your return, excluding

jointly and converted $20,000 from

trustee-to-trustee transfer. You

extensions. If necessary, file an

your traditional IRA to a new Roth

deduct the $1,000 traditional IRA

amended return reflecting the transfer

IRA on May 22, 2003. On April 9,

contribution on Form 1040. You are

(see page 5). Write “Filed pursuant to

2004, you determine that your 2003

not required to file Form 8606, but

section 301.9100-2” on the amended

modified AGI for Roth IRA purposes

you must attach a statement to your

return.

will exceed $100,000, and you are

return explaining the

not allowed to make a Roth IRA

recharacterization. The statement

Reporting recharacterizations. Any

conversion. The value of the Roth

indicates that you contributed $3,000

recharacterized conversion will be

IRA on that date is $19,000. You

to a traditional IRA on May 31, 2003;

treated as though the conversion had

recharacterize the conversion by

recharacterized $2,000 of that

not occurred. Any recharacterized

transferring that entire amount to a

contribution on February 24, 2004, by

contribution will be treated as having

traditional IRA in a trustee-to-trustee

transferring $2,000 plus $200 of

been originally contributed to the

transfer. You report $20,000 on Form

related earnings from your traditional

second IRA, not the first IRA. The

1040, line 15a. You do not include

IRA to a Roth IRA in a

amount transferred must include

the $19,000 on line 15a because it

trustee-to-trustee transfer; and that all

related earnings or be reduced by

did not occur in 2003 (you also do not

$1,000 of the remaining traditional

any loss. In most cases, the related

report that amount on your 2004

IRA contribution is deducted on Form

earnings that you must transfer are

return because it does not apply to

1040. You do not report the $2,200

figured by your IRA trustee or

the 2004 tax year). You attach a

distribution from your traditional IRA

custodian. If you need to figure the

statement to Form 1040 explaining

on your 2003 Form 1040 because the

related earnings, see How Do You

that you made a conversion of

distribution occurred in 2004. You do

Recharacterize a Contribution in

$20,000 from a traditional IRA on

not report the distribution on your

Pub. 590. Any earnings or loss that

May 22, 2003, and that you

2004 Form 1040 because the

occurred in the first IRA will be

recharacterized the entire amount,

recharacterization related to 2003

treated as having occurred in the

which was then valued at $19,000,

and was explained in an attachment

second IRA. You may not deduct any

back to a traditional IRA on April 9,

to your 2003 return.

loss that occurred while the funds

2004, because your 2003 modified

were in the first IRA. Also, you cannot

3. You made a contribution to a

AGI for Roth IRA purposes exceeded

take a deduction for a contribution to

Roth IRA and later recharacterized

$100,000.

a traditional IRA if the amount is later

part or all of it to a traditional IRA.

recharacterized. See below for how to

2. You made a contribution to a

Report the nondeductible traditional

report the three different types of

traditional IRA and later

IRA portion, if any, on Form 8606,

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Instructions For Form 8606 - Nondeductible Iras - 2003 Page 3

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