Instructions For Form 8606 - Nondeductible Iras

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for 2005 and 2006 reflecting the

Forms 5498 or similar statements

Line 2

additional 6% tax on excess

you received each year showing

If this is the first year you are required

contributions on Form 5329. You

contributions you made to a traditional

to file Form 8606, enter -0-. Otherwise,

include the $7,000 distribution on your

IRA or Roth IRA.

use the chart below to find the amount

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2007 Form 1040, line 15a, enter -0- on

Forms 5498 or similar statements

to enter on line 2.

line 15b, and attach a statement to your

you received showing the value of your

return explaining the distribution,

traditional IRAs for each year you

However, you may need to enter an

including the fact that you filed

received a distribution.

amount other than -0- or adjust the

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amended returns for 2005 and 2006

Forms 1099-R or W-2P you received

amount from the chart if your basis

and paid the additional 6% tax on the

for each year you received a

changed because of any of the

excess contributions for those years.

distribution.

following.

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The statement indicates that the

You had a return of excess traditional

Note. Forms 1040-T and W-2P are

distribution is not taxable because (a) it

IRA contributions (see page 4).

forms that were used in prior years.

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was made after the due dates of your

Incident to divorce, you transferred or

2005 and 2006 tax returns, including

received part or all of a traditional IRA

extensions, (b) your total IRA

(see the last bulleted item under Line 7

Specific Instructions

contributions did not exceed $4,000

on page 6).

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

You rolled over any nontaxable

Name and social security number

2005) for 2005 or $4,000 ($5,000 if age

portion of your qualified employer plan

(SSN). If you file a joint return, enter

50 or older at the end of 2006) for

to a traditional or SEP IRA. Include the

only the name and SSN of the spouse

2006, and (c) you did not take a

nontaxable portion on

whose information is being reported on

deduction for the contributions, and no

line 2.

Form 8606. If both you and your

deduction was allowable because you

spouse are required to file Form 8606,

did not have any taxable compensation

IF the last Form

THEN enter on line

file a separate Form 8606 for each of

8606 you filed was 2...

for those years. The statement also

you.

for...

indicates that the distribution reduced

your excess contributions to -0-, as

Part I—Nondeductible

2006, 2005, 2004,

The amount from

reflected on your 2007 Form 5329 and

2003, 2002, or 2001 line 14 of that Form

Contributions to

it indicates your adjusted basis in

8606

nondeductible contributions.

Traditional IRAs and

A year after 1992

The amount from

Amending Form 8606

and before 2001

line 12 of that Form

Distributions From

8606

After you file your return, you can

Traditional, SEP, and

A year after 1988

The amount from

change a nondeductible contribution to

and before 1993

line 14 of that Form

a traditional IRA to a deductible

SIMPLE IRAs

8606

contribution or vice versa. You also

may be able to make a

Line 1

1988

The total of the

recharacterization (see page 3). If

amounts on lines 7

If you used the IRA Deduction

necessary, complete a new Form 8606

and 16 of that Form

Worksheet in the Form 1040 or 1040A

showing the revised information and file

8606

instructions, subtract line 12 (line 10 for

it with Form 1040X, Amended U.S.

Form 1040A) of the worksheet (or the

1987

The total of the

Individual Income Tax Return.

amount you chose to deduct on Form

amounts on lines 4

and 13 of that Form

1040, line 32, or Form 1040A, line 17, if

Penalty for Not Filing

8606

less) from the smaller of line 10 or line

If you are required to file Form 8606 to

11 (line 8 or line 9 for Form 1040A) of

report a nondeductible contribution to a

the worksheet. Enter the result on line 1

traditional IRA for 2007, but do not do

Line 4

of Form 8606. You cannot deduct the

so, you must pay a $50 penalty, unless

amount included on line 1.

If you made contributions to traditional

you can show reasonable cause.

IRAs for 2007 in 2007 and 2008 and

If you used the worksheet Figuring

you have both deductible and

Your Reduced IRA Deduction for 2007

Overstatement Penalty

nondeductible contributions, you can

in Pub. 590, enter on line 1 of Form

If you overstate your nondeductible

choose to treat the contributions made

8606 any nondeductible contributions

contributions, you must pay a $100

in 2007 first as nondeductible

from the appropriate lines of that

penalty, unless you can show

contributions and then as deductible

worksheet.

reasonable cause.

contributions, or vice versa. But the

If you did not have any deductible

amount on line 4 cannot be less than

contributions, you can make

What Records Must I

the excess, if any, of the amount on line

nondeductible contributions up to your

1 over the contributions you actually

Keep?

contribution limit. Enter on line 1 of

made in 2007.

Form 8606 your nondeductible

To verify the nontaxable part of

contributions.

Example. You made contributions

distributions from your IRAs, including

for 2007 of $2,000 in May 2007 and

Include on line 1 any repayment of a

Roth IRAs, keep a copy of the following

$2,000 in January 2008, of which

qualified reservist distribution. Also,

forms and records until all distributions

$3,000 are deductible and $1,000 are

include any repayment of a qualified

are made.

nondeductible. You choose $1,000 of

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hurricane distribution that is attributable

Page 1 of Forms 1040 (or Forms

your contribution in 2007 to be

to previously nondeductible

1040A, 1040NR, or 1040-T) filed for

nondeductible. You enter the $1,000 on

contributions.

each year you made a nondeductible

line 1, but not line 4, and it becomes

contribution to a traditional IRA.

Do not include on line 1 contributions

part of your basis for 2007.

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Forms 8606 and any supporting

that you had returned to you with the

statements, attachments, and

related earnings (or less any loss). See

Although the contributions to

worksheets for all applicable years.

page 4.

traditional IRAs for 2007 that you made

-5-

Instructions For Form 8606 - Nondeductible Iras - 2007 Page 5

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