Need help with line 7 of 8606

forologia · ‎May 31, 2019

We took our first IRA distributions in December 2016 and are preparing 2016 tax forms.

In preparing the 8606 regarding the distributions we took from our individual IRA accounts I noticed that my wife’s account is categorized as a “rollover” account by my brokerage firm.

We’ve had simple/traditional IRA accounts with several different brokerage firms over three decades, and somehow when we once transferred our accounts hers got labeled a roll over.

In filling out line 7 of her 8606 the instructions say to enter the net amount but do not include rollovers. This is somewhat confusing. Are rollover distributions treated differently from distributions from other simple IRA accounts. Thanks for your help in clarifying this.

MiriamF · ‎May 31, 2019

Based upon your description, the “rollover” clause does not apply to you. You should only enter the amount of money that you withdrew from your IRAs.

Your wife’s “rollover” account is the brokerage firm’s way of alerting their staff and the IRS that they have no way of knowing the original basis of the account, since they have not always been the custodians. Therefore, they do not know if any of the contributions have already been taxed.

When line 7 refers to a rollover, they want to know if any of the money you withdrew this year was rolled over into another qualifying (pre-tax) account. If so, that money does not count as part of your Required Minimum Distribution (RMD) and is exempt from tax. Do not include a current year rollover on Line 7.

Instructions for Form 8606 can be found below.

https://www.irs.gov/pub/irs-pdf/i8606.pdf

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Need help with line 7 of 8606

Retirement tax questions