What Is IRS Form 8606?

Tax Form 8606 Explained

Man filling out tax forms at the dining room table

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Form 8606 is an IRS tax form you're required to file if you've made nondeductible contributions to an individual retirement account (IRA) during the tax year. It is also required if you have taken Roth IRA distributions or certain other IRA distributions, or if you have converted certain accounts to a Roth IRA during the year.

Several retirement-planning scenarios might require you to file Form 8606. Learn what they are and how to properly fill out the form.

What Is IRS Form 8606?

The most common reason to file Form 8606 is making nondeductible (after-tax) contributions to a traditional IRA. Because these contributions do not reduce your taxable income as regular IRA contributions do, they must be reported and taxed accordingly. This would typically happen if you have maxed out your regular tax-deductible contributions for the year but still want to make additional contributions to your retirement fund.

If you have ever made nondeductible contributions to an IRA, SEP IRA, or SIMPLE IRA, you'll also need to use Form 8606 to report any distributions you take from these accounts, along with all Roth IRA distributions.

Form 8606 isn't required when you contribute to a Roth IRA, because those contributions are never tax-deductible, but the form is required if you convert a traditional IRA, SEP, or Simple IRA to a Roth IRA.

IRS Form 8606

Who Uses IRS Form 8606?

You'll need to file form 8606 if any of the following applied to you during the tax year:

  • You made nondeductible contributions to any traditional IRAs.
  • You took distributions from any traditional, SEP, or SIMPLE IRA to which you have ever made any nondeductible contributions.
  • You took distributions from a Roth IRA.
  • You converted any traditional, SEP, or SIMPLE IRA to a Roth IRA.

Where to Get a Form 8606?

You can find Form 8606 on the IRS website. It's also available at many office supply stores, libraries, post offices, and other businesses that provide free tax forms. Ask your accountant if they can provide you with a copy. If you file with software such as TurboTax, the software will automatically fill out the form if it determines that you meet the criteria.

How to Fill Out and Read Form 8606

To fill out Form 8606, you'll need to gather your information about and nondeductible contributions you made during the tax year, along with the total basis you've built up in previous years (Line 14 from your most recent Form 8606).

If you have made any previous nondeductible contributions, you'll also need to document any distributions you've withdrawn from traditional, SEP, or SIMPLE IRAs (Part II) as well as any distributions from Roth IRAs (Part III).

Can IRS Form 8606 Be E-Filed?

You can e-file Form 8606 with the rest of your annual tax return when you e-file your 1040 and any other tax forms, along with any payments due.

Where to Mail Form 8606

If you file by mail, send Form 8606 with Form 1040, your tax payment, and any other relevant tax forms, postmarked on or before the annual filing deadline, to the IRS processing office for your state.

How to File Form 8606

File Form 8606 with your annual tax return, usually due on or around April 15. You can file it by mail or online. Technically, the penalty for filing a late Form 8606 is $50, but the IRS is willing to waive this penalty if you can show reasonable cause for the delay. 

The IRS has extended many filing deadlines for 2020 taxes. Individual tax returns are due May 17, 2021, instead of April 15.

Tax Rules for IRA Contributions

The IRS limits your deductible contributions if you or your spouse are covered by a retirement plan through your employer, and it also limits the overall amounts you can contribute and deduct.

Some taxpayers find that they have no other choice but to make nondeductible contributions if they want to save more for retirement.

  • You can only make annual deductible contributions of up to $6,000 in tax years 2020 and 2021, or up to $7,000 if you're age 50 or older.
  • This limit for deductible contributions begins dropping, however, if you or your spouse are covered by a retirement plan at work and if your modified adjusted gross income (MAGI) is more than $66,000 in the 2021 tax year. This increases to $105,000 if you're married and file a joint return with your spouse, but it plummets to $10,000 if you're married and file a separate return.
  • You're disqualified entirely from claiming deductible contributions if you're covered by a retirement plan at work and your MAGI is $76,000 or more in 2021 and you're single, $125,000 or more if you're married and filing jointly, or $10,000 if you're married and file a separate return.

You can contribute money in excess of these rules or if you don't qualify due to your income, but you must do so with after-tax dollars and fill out From 8606.

Key Takeaways

  • IRS Form 8606 is a tax form for documenting nondeductible contributions and any associated distributions from traditional, SEP, and SIMPLE IRAs.
  • It is also used to report any distributions from Roth IRAs or conversions of traditional, SEP, or SIMPLE IRAs to Roth IRAs.
  • If you meet any of these criteria, you must file Form 8606 with your annual federal tax return.

Note: Tax laws change periodically, and the above information may not reflect the most recent changes. Please consult with a tax professional for the most up-to-date advice. The information contained in this article is not intended as tax advice, and it is not a substitute for tax advice.