Form 8606 is used to report nondeductible traditional IRA contributions and traditional to ROTH IRA conversions, as well as calculate the taxable portion of a nonqualified distribution from your ROTH IRA.
Where do I enter this form?
This form is entered under:
- Adjustments to Income
- Nondeductible IRAs Form 8606
How do I report a nondeductible IRA contribution?
There are two steps required to properly report your nondeductible traditional IRA contribution. First visit the Form 8606 entry and complete section one for contributions. Here you will complete the following if applicable:
- Total basis in traditional IRAs
- List any contributions that were made between January and April 15th before the return due date
- Total value all your traditional, SEP, and SIMPLE IRAs as of December of the tax year
- Any outstanding rollovers
- Traditional IRA distributions (reported to you on form 1099-R) received during 2023
- The net amount converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2023
- The taxable Amount from Qualified Hurricane Distributions
Please note: Any taxable amount calculated by this form will NOT carry to Form 1040. Please ensure the appropriate taxable amount is manually adjusted on box 2a of your 1099-R.
Next, enter your contributions in the IRA deduction entry to populate line 1 of Form 8606. To do so visit:
- Adjustments to Income
- IRA Deduction
- Complete the section in full
How do I report distributions from my ROTH IRA and calculate the appropriate taxable amount?
Distributions taken from a ROTH IRA before you reach age 59 and ½ are considered nonqualified distributions and may be partially taxable. Your original contributions are returned tax free, but you must pay income tax on any portion of the distribution attributable to earnings. To calculate the taxable portion, visit Form 8606 and complete the Distributions from Roth IRAs section. Enter the following if applicable:
- Enter the total nonqualified distributions from ROTH IRAs taken in the current tax year
- Enter your Basis in ROTH IRA contributions
- Enter your Basis in ROTH IRA conversions
- Enter any qualified first home buyer expenses
To view the calculated taxable amount, select Summary/Print from the left side menu and print the return. Line 25c of Form 8606 lists the calculated taxable amount. Ensure that you adjust box 2a of your 1099-R form to match this amount.
For more information regarding Form 8606, please review the IRS instructions.