Instructions For Form 8606 - Nondeductible Iras

statement to your return explaining the

(Including IRAs) and Other

Return of Excess

recharacterization. If the

Tax-Favored Accounts).

Traditional IRA

recharacterization occurred in 2007,

If you timely filed your 2007 tax

include the amount transferred from the

Contributions

return without withdrawing a

Roth IRA on Form 1040, line 15a; Form

contribution that you made in 2007, you

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

The return (distribution) in 2007 of

can still have the contribution returned

16a. If the recharacterization occurred

excess traditional IRA contributions for

to you within 6 months of the due date

in 2008, report the amount transferred

years prior to 2007 is not taxable if all

of your 2007 tax return, excluding

only in the attached statement, and not

three of the following apply.

extensions. If you do, file an amended

on your 2007 or 2008 tax return.

1. The distribution was made after

return with “Filed pursuant to section

Example. You are single and

the due date, including extensions, of

301.9100-2” written at the top. Report

contributed $4,000 to a new Roth IRA

your tax return for the year for which

any related earnings on the amended

on June 14, 2007. On December 27,

the contribution was made (if the

return and include an explanation of the

2007, you determine that your 2007

distribution was made earlier, see

withdrawal. Make any other necessary

modified AGI will allow a full traditional

Return of IRA Contributions on this

changes on the amended return (for

IRA deduction. You decide to

page).

example, if you reported the

recharacterize the Roth IRA

2. The total contributions (excluding

contributions as excess contributions

contribution as a traditional IRA

rollovers and conversions) to your

on your original return, include an

contribution and have $4,200, the

traditional and SEP IRAs for the year

amended Form 5329 reflecting that the

balance in the Roth IRA account

for which the excess contribution was

withdrawn contributions are no longer

($4,000 contribution plus $200 related

made did not exceed:

treated as having been contributed).

earnings), transferred from your Roth

a. $4,000 ($5,000 if age 50 or older

IRA to a traditional IRA in a

In most cases, the related earnings

at the end of the year) for 2006,

trustee-to-trustee transfer. You deduct

that you must withdraw are figured by

b. $4,000 ($4,500 if age 50 or older

the $4,000 traditional IRA contribution

your IRA trustee or custodian. If you

at the end of the year) for 2005,

on Form 1040. You are not required to

need to figure the related earnings on

c. $3,000 ($3,500 if age 50 or older

file Form 8606, but you must attach a

IRA contributions that were returned to

at the end of the year) for years after

statement to your return explaining the

you, see Contributions Returned Before

2001 and before 2005,

recharacterization. The statement

Due Date of Return in Pub. 590. If you

d. $2,000 for years after 1996 and

indicates that you contributed $4,000 to

made a contribution or distribution while

before 2002, or

a new Roth IRA on June 14, 2007;

the IRA held the returned contribution,

e. $2,250 for years before 1997.

recharacterized that contribution on

see Pub. 590.

If your total IRA contributions for the

December 27, 2007, by transferring

year included employer contributions to

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

If you made a contribution for 2006

a SEP IRA, increase the $4,000

a traditional IRA in a trustee-to-trustee

and you had it returned to you in 2007

($5,000 or $4,500, if applicable),

transfer; and that $4,000 of the

as described above, do not report the

$3,000 ($3,500, if applicable), $2,000,

traditional IRA contribution is deducted

distribution on your 2007 tax return.

or $2,250 by the smaller of the

on Form 1040. You include the $4,200

Instead, report it on your 2006 original

employer contributions or $44,000

distribution on your 2007 Form 1040,

or amended return in the manner

($42,000 for 2005, $41,000 for 2004,

line 15a.

described above.

$40,000 for 2003 and 2002, $35,000 for

2001, or $30,000 for years before

Example. On May 31, 2007, you

2001).

Return of IRA

contributed $4,000 to your traditional

3. No deduction was allowable

IRA. The value of the IRA was $18,000

Contributions

(without regard to the modified AGI

prior to the contribution. On December

limitation) or taken for the excess

29, 2007, when you are age 57 and the

If, in 2007, you made traditional IRA

contributions.

value of the IRA is $23,600, you realize

contributions or Roth IRA contributions

you cannot make the entire contribution

for 2007 and you had those

Include the total amount distributed

because your taxable compensation for

contributions returned to you with any

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

the year will be only $3,000. You

related earnings (or less any loss) by

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

decide to have $1,000 of the

the due date (including extensions) of

and attach a statement to your return

contribution returned to you and

your 2007 tax return, the returned

explaining the distribution. See the

withdraw $1,076 from your IRA ($1,000

contributions are treated as if they were

example below.

contribution plus $76 earnings). You did

never contributed. Do not report the

If you meet these conditions and are

not make any other withdrawals or

contribution or distribution on Form

otherwise required to file Form 8606:

contributions. You are not required to

8606 or take a deduction for the

•

Do not take into account the amount

file Form 8606. You deduct the $3,000

contribution. However, you must report

of the withdrawn contributions in

remaining contribution on Form 1040.

the distribution and any related

figuring line 2, and

You include $1,076 on Form 1040, line

earnings on your 2007 Form 1040,

•

Do not include the amount of the

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

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

withdrawn contributions on line 7.

statement to your tax return explaining

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

the distribution. Because you properly

16a and 16b. Attach a statement

Example. You are single, you

explaining the distribution. You cannot

removed the excess contribution with

retired in 2004, and you had no taxable

deduct any loss that occurred (see Pub.

the related earnings by the due date of

compensation after 2004. However, you

590 for an exception if you withdrew the

your tax return, you are not subject to

made traditional IRA contributions (that

entire amount in all your traditional or

the additional 6% tax on excess

you did not deduct) of $3,000 in 2005

contributions. However, because you

Roth IRAs). Also, if you were under age

and $4,000 in 2006. In November 2007,

were under age 59

at the time of the

at the time of a distribution with

a tax practitioner informed you that you

distribution, the $76 of earnings is

related earnings, you generally are

had made excess contributions for

subject to the additional 10% tax on

those years because you had no

early distributions. You include $7.60

early distributions (see Form 5329,

taxable compensation. You withdrew

on Form 1040, line 60.

Additional Taxes on Qualified Plans

the $7,000 and filed amended returns

-4-

Instructions For Form 8606 - Nondeductible Iras - 2007 Page 4

Related Articles

Related forms

Related Categories