For several years I have moved after-tax dollars to my Roth-IRA and I also contribute to my wife's IRA whatever the max amount is allowed. That has worked well for me for many years.
However, as my wages increased I gradually got to the place where the following occurs:
1. I can no longer make contributions to my Roth IRA because I'm making too much now.
2. For the same reason, I can no long make a deductible contribution to my wife's Traditional IRA.
As I was doing my taxes this year, I was introduced to the "making non-deductible Traditional IRA" questions. This, in turn, drew me into the world of form 8606 and given the option to track non-deductible contributions. I would say that in all the years I've been making contributions to my wife's or my own Traditional IRA, there have been maybe 3 times, I was 1) Allowed to make the contributions but 2) because my income was such I could not take advantage of the deduction. You may be wondering why I would make a non-deductible contritution, and it's simple, I am trying to at least shelter my earnings from taxes (I know, I'll pay them later, eventually when I withdraw). Anyway, given that there have only been a few times of made non-deductible contributions should I even bother with an 8606? I'd say my basis amount through all the years is about $15K.
If I understand it correctly, if I don't provide the basis then when I go to withdraw the funds, I'll end of paying tax on money that has already been taxed (post-tax dollars were contributed).
If I do decide to use a basis, can I do this on one 8606 or do I have to submit amended returns for each year I had non-deductible contributions? It seems like a lot of hassle to do this and I'm not sure it's worth the effort.
Thanks!
