Instructions For Form 8606 - Nondeductible Iras

Note. Rollovers, Roth IRA

first IRA. The amount transferred must

2. You made a contribution to a

conversions, Roth IRA rollovers from

include related earnings or be reduced

traditional IRA and later recharacterized

qualified retirement plans, and

by any loss. In most cases, the related

part or all of it to a Roth IRA. If you

repayments of qualified hurricane,

earnings that you must transfer are

recharacterized only part of the

disaster recovery assistance, recovery

figured by your IRA trustee or

contribution, report the nondeductible

assistance, and reservist distributions

custodian. If you need to figure the

traditional IRA portion of the remaining

do not affect your contribution limit.

related earnings, see How Do You

contribution, if any, on Form 8606, Part

Recharacterize a Contribution in Pub.

I. If you recharacterized the entire

The amount you can contribute

590. Any earnings or loss that occurred

contribution, do not report the

to a Roth IRA may also be

in the first IRA will be treated as having

contribution on Form 8606. In either

limited by your modified AGI

CAUTION

occurred in the second IRA. You

case, attach a statement to your return

(see Contributions and the Maximum

cannot deduct any loss that occurred

explaining the recharacterization. If the

Roth IRA Contribution Worksheet on

while the funds were in the first IRA.

recharacterization occurred in 2009,

page 2).

Also, you cannot take a deduction for a

include the amount transferred from the

Taxable compensation includes the

contribution to a traditional IRA if the

traditional IRA on Form 1040, line 15a;

following.

amount is later recharacterized. The

Form 1040A, line 11a; or Form

•

Wages, salaries, tips, etc. If you

following discussion explains how to

1040NR, line 16a. If the

received a distribution from a

report the four different types of

recharacterization occurred in 2010,

nonqualified deferred compensation

recharacterizations, including the

report the amount transferred only in

plan or nongovernmental section 457

statement that must be attached to your

the attached statement.

plan that is included in Form W-2, box

return explaining the recharacterization.

Example. You are single, covered

1, or in Form 1099-MISC, box 7, do not

1. You converted an amount from a

by a retirement plan, and you

include that distribution in taxable

traditional, SEP, or SIMPLE IRA to a

contributed $4,000 to a new traditional

compensation. The distribution should

Roth IRA in 2009 and later

IRA on May 27, 2009. On February 24,

be shown in (a) Form W-2, box 11, (b)

recharacterized all or part of the

2010, you determine that your 2009

Form W-2, box 12, with code Z, or (c)

amount back to a traditional, SEP, or

modified AGI will limit your traditional

Form 1099-MISC, box 15b. If it is not,

SIMPLE IRA. If you only

IRA deduction to $1,000. The value of

contact your employer for the amount

recharacterized part of the amount

your traditional IRA on that date is

of the distribution.

•

converted, report the amount not

$4,400. You decide to recharacterize

Nontaxable combat pay and any

recharacterized on Form 8606. If you

$3,000 of the traditional IRA

differential wage payments if you were

recharacterized the entire amount, do

contribution as a Roth IRA contribution,

a member of the U.S. Armed Forces.

•

not report the recharacterization on

Self-employment income. If you are

and have $3,300 ($3,000 contribution

Form 8606. In either case, attach a

self-employed (a sole proprietor or a

plus $300 related earnings) transferred

statement to your return explaining the

partner), taxable compensation is your

from your traditional IRA to a Roth IRA

recharacterization and include the

net earnings from your trade or

in a trustee-to-trustee transfer. You

amount converted from the traditional,

business (provided your personal

deduct the $1,000 traditional IRA

SEP, or SIMPLE IRA in the total on

services are a material

contribution on Form 1040. You are not

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

income-producing factor) reduced by

required to file Form 8606, but you

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

your deduction for contributions made

must attach a statement to your return

recharacterization occurred in 2009,

on your behalf to retirement plans and

explaining the recharacterization. The

also include the amount transferred

the deduction allowed for one-half of

statement indicates that you contributed

back from the Roth IRA on that line. If

your self-employment tax.

$4,000 to a traditional IRA on May 27,

•

the recharacterization occurred in 2010,

Alimony and separate maintenance.

2009; recharacterized $3,000 of that

report the amount transferred only in

contribution on February 24, 2010, by

See Pub. 590 for details.

the attached statement, and not on

transferring $3,000 plus $300 of related

your 2009 or 2010 tax return (a 2010

Recharacterizations

earnings from your traditional IRA to a

Form 1099-R should be sent to you by

Roth IRA in a trustee-to-trustee

February 1, 2011, stating that you

Generally, you can recharacterize

transfer; and that all $1,000 of the

(correct) an IRA contribution, Roth IRA

made a recharacterization of an amount

remaining traditional IRA contribution is

converted in the prior year).

conversion, or a Roth IRA rollover from

deducted on Form 1040. You do not

a qualified retirement plan by making a

Example. You are married filing

report the $3,300 distribution from your

trustee-to-trustee transfer from one IRA

jointly and converted $20,000 from your

traditional IRA on your 2009 Form 1040

to another type of IRA.

traditional IRA to a new Roth IRA on

because the distribution occurred in

Trustee-to-trustee transfers are made

May 20, 2009. On April 7, 2010, you

2010. You do not report the distribution

directly between financial institutions or

determine that your 2009 modified AGI

on your 2010 Form 1040 because the

within the same financial institution.

for Roth IRA purposes will exceed

recharacterization related to 2009 and

You generally must make the transfer

$100,000, and you are not allowed to

was explained in an attachment to your

by the due date of your return

make a Roth IRA conversion. The value

2009 return.

(including extensions) and reflect it on

of the Roth IRA on that date is $19,000.

your return. However, if you timely filed

3. You made a contribution to a

You recharacterize the conversion by

your return without making the transfer,

Roth IRA and later recharacterized part

transferring that entire amount to a

you can make the transfer within 6

or all of it to a traditional IRA. Report

traditional IRA in a trustee-to-trustee

months of the due date of your return,

the nondeductible traditional IRA

transfer. You report $20,000 on Form

excluding extensions. If necessary, file

portion, if any, on Form 8606, Part I. If

1040, line 15a. You do not include the

an amended return reflecting the

you did not recharacterize the entire

$19,000 on line 15a because it did not

transfer (see page 5). Write “Filed

contribution, do not report the

occur in 2009 (you also do not report

pursuant to section 301.9100-2” on the

remaining Roth IRA portion of the

that amount on your 2010 return

amended return.

contribution on Form 8606. Attach a

because it does not apply to the 2010

statement to your return explaining the

Reporting recharacterizations. Any

tax year). You attach a statement to

recharacterization. If the

recharacterized conversion or Roth IRA

Form 1040 explaining that (a) you

recharacterization occurred in 2009,

rollover from a qualified retirement plan

made a conversion of $20,000 from a

include the amount transferred from the

will be treated as though the conversion

traditional IRA on May 20, 2009, and

or rollover had not occurred. Any

(b) you recharacterized the entire

Roth IRA on Form 1040, line 15a; Form

recharacterized contribution will be

amount, which was then valued at

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

16a. If the recharacterization occurred

treated as having been originally

$19,000, back to a traditional IRA on

contributed to the second IRA, not the

April 7, 2010.

in 2010, report the amount transferred

-3-

Instructions for Form 8606 (2009)

Instructions For Form 8606 - Nondeductible Iras - 2009 Page 3

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