Instructions For Form 8606 - Nondeductible Iras

Part I. If you did not recharacterize

report the distribution and any related

IRA immediately prior to the

the entire contribution, do not report

earnings on your 2003 Form 1040,

distribution minus the value of the

the remaining Roth IRA portion of the

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

IRA immediately after the contribution

contribution on Form 8606. Attach a

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

was made. See the example below. If

statement to your return explaining

16a and 16b. Attach a statement

you made a contribution or

the recharacterization. If the

explaining the distribution. You may

distribution while the IRA held the

recharacterization occurred in 2003,

not deduct any loss that occurred

returned contribution, see Notice

include the amount transferred from

(see Pub. 590 for an exception if you

2000-39.

the Roth IRA on Form 1040, line 15a;

withdrew the entire amount in all your

If you made a contribution in 2002

Form 1040A, line 11a; or Form

traditional or Roth IRAs). Also, if you

and you had it returned to you in

1040NR, line 16a. If the

were under age 59

at the time of a

2003 as described above, do not

recharacterization occurred in 2004,

distribution with related earnings, you

report the distribution on your 2003

report the amount transferred only in

generally are subject to the additional

tax return. Instead, report it on your

the attached statement, and not on

10% tax on early distributions (see

2002 original or amended return in

your 2003 or 2004 tax return.

Form 5329, Additional Taxes on

the manner described above.

Qualified Plans (Including IRAs) and

Example. You are single and

Likewise, report on your 2004 tax

Other Tax-Favored Accounts).

contributed $3,000 to a new Roth IRA

return any distribution made in 2004

on June 13, 2003. On December 26,

If you timely filed your 2003 tax

that is a return of contributions that

2003, you determine that your 2003

return without withdrawing a

were made in 2004 for 2003 (but be

modified AGI will allow a full

contribution that you made in 2003,

sure that your original or amended

traditional IRA deduction. You decide

you may still have the contribution

2003 tax return reflects that the

to recharacterize the Roth IRA

returned to you within 6 months of the

contribution is treated as not having

contribution as a traditional IRA

due date of your 2003 tax return,

been contributed).

contribution and have $3,200, the

excluding extensions. If you do, file

balance in the Roth IRA account

an amended return with “Filed

Example. On May 31, 2003, you

($3,000 contribution plus $200 related

pursuant to section 301.9100-2”

contributed $3,000 to your traditional

earnings), transferred from your Roth

written at the top. Report any related

IRA. The value of the IRA was

IRA to a traditional IRA in a

earnings on the amended return and

$18,000 prior to the contribution. On

trustee-to-trustee transfer. You

include an explanation of the

December 29, 2003, when you are

deduct the $3,000 traditional IRA

withdrawal. Make any other

age 57 and the value of the IRA is

contribution on Form 1040. You are

necessary changes on the amended

$22,600, you realize you cannot

not required to file Form 8606, but

return (for example, if you reported

make the entire contribution because

you must attach a statement to your

the contributions as excess

your taxable compensation for the

return explaining the

contributions on your original return,

year will be only $2,000. You decide

recharacterization. The statement

include an amended Form 5329

to have $1,000 of the contribution

indicates that you contributed $3,000

reflecting that the withdrawn

returned to you and withdraw $1,076

to a new Roth IRA on June 13, 2003;

contributions are no longer treated as

from your IRA ($1,000 contribution

recharacterized that contribution on

having been contributed).

plus $76 earnings). You did not make

December 26, 2003, by transferring

In most cases, the related earnings

any other withdrawals or

$3,200, the balance in the Roth IRA,

that you must withdraw are figured by

contributions. The earnings were

to a traditional IRA in a

your IRA trustee or custodian. If you

figured according to Notice 2000-39

trustee-to-trustee transfer; and that

need to figure the related earnings on

by first dividing the $1,600 increase in

$3,000 of the traditional IRA

IRA contributions that were made in

the value of the IRA by $21,000 (the

contribution is deducted on Form

2002 or 2003 and were returned to

value of the IRA immediately after the

1040. You include the $3,200

contribution) and multiplying the

you, use Notice 2000-39, section

distribution on your 2003 Form 1040,

result by $1,000 (the amount being

1.408A-5, A-2(c), or Worksheet 1-4

line 15a.

in Pub. 590. You can find Notice

returned). You are not required to file

2000-39 on page 132 of Internal

Form 8606. You deduct the $2000

Return of IRA

Revenue Bulletin 2000-30 at

remaining contribution on Form 1040.

You include $1,076 on Form 1040,

Contributions

irb00-30.pdf. Notice 2000-39 permits

line 15a, and $76 on line 15b. You

If, in 2003, you made traditional IRA

the earnings or loss to be determined

attach a statement to your tax return

explaining the distribution. Because

contributions or Roth IRA

by allocating to the contribution a

you properly removed the excess

contributions for 2002 or 2003 and

pro-rata share of the earnings that

you had those contributions returned

accrued in the IRA during the period

contribution with the related earnings

to you with any related earnings (or

the IRA held the contribution. If there

by the due date of your tax return,

less any loss) by the due date

are no intervening contributions or

you are not subject to the additional

(including extensions) of your 2003

distributions, the earnings (or loss) is

6% tax on excess contributions.

tax return, the returned contributions

equal to the contribution multiplied by

However, because you were under

at the time of the

are treated as if they were never

the net change in the value of the IRA

age 59

distribution, the $76 of earnings is

contributed. Do not report the

divided by the value of the IRA

subject to the additional 10% tax on

contribution or distribution on Form

immediately after the contribution was

8606 or take a deduction for the

made. The net change in the value of

early distributions. You include $7.60

contribution. However, you must

the IRA is equal to the value of the

on Form 1040, line 57.

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Instructions For Form 8606 - Nondeductible Iras - 2003 Page 4

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