We have populated yearly numbers for form 8606. i noticed they seem to have relevance when we do sep conversions to roth. those are all done. I believe the basis amounts help reduce the taxable amounts since they go down after following the formulas? Now all those are done, how do we use the remaining total basis to help with taxes? how are they applied? I asked my adviser if they help with RMDs and he said 8606 has no bearing..so when do i use the amounts to offset and what do i offset against? is there a link that explains a simple explanation?
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The basis on your 8606 goes against your traditional / SEP IRA distributions. For example: you have $10,000 in a traditional IRA, it is normally all taxable. If you have an 8606 with $7,000 basis, then only $3,000 is taxable.
When you switched to a ROTH, the income would have been the $3,000.
If you suffered losses, you may have a basis larger than the account value. You also moved parts and pieces so that values had to be proportionate. In the example, the basis was 70% of the value. I presume you had multiple accounts covered and moved.
You can amend up to 3 years returns - if you feel there was an error.
Reference:
About Form 8606, Nondeductible IRAs - IRS
" he said 8606 has no bearing.."
Maybe you need a new advisor.
Your basis is prorated whenever you take funds from an IRA.
Form 8606 is required.
It will be attached by the software when you tell TurboTax you have a basis (non-deductible contributions)
IRS requires you to keep copies of all Forms 8606 until the end of your IRA.
The last filed copy is the most important.
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