IRS Form 8606

GTEE88 — Sun, 13 Feb 2022 17:25:59 GMT

Taxpayer participated in a company-sponsored 401k Plan where contributions were tax deductible. During this time, taxpayer also contributed nondeductible money into a traditional IRA for a number of years until the Roth IRA came into existence. At that time, contributions into the traditional IRA were terminated and the contributions were made to the Roth IRA. Upon retirement, the monies in both the traditional nondeductible IRA and the 401k Plan were combined and rolled over into a single traditional or rollover IRA. Thus, this new combined rollover IRA contains both deductible and nondeductible contributions. The Roth IRA contributions are accounted for separately and do not figure into this discussion.

Taxpayer has reached the age where he is must take Required Minimum Distributions from the combined rollover IRA. Because some of the funds in the combined rollover IRA are from nondeductible contributions, it is necessary to file IRS Form 8606 Nondeductible IRAs.

The question is this: When filling out Form 8606, what number should be listed on Item 2, “Enter your total basis in traditional IRAs”? Unfortunately, none of the IRS guidance in the instructions for Form 8606 or IRA Publication 590-B define whether “traditional” means just the cost basis of the nondeductible contributions or the cost basis of the combined nondeductible and deductible contributions. Should this number be the cost basis of only the nondeductible IRA contributions made in the traditional IRA prior to combining that IRA with the 401k Plan contributions into a single rollover IRA or should it be the combined cost basis of the original traditional IRA contributions plus the cost basis of the 401k Plan contributions?

Re: IRS Form 8606

MinhT1 — Sun, 13 Feb 2022 17:40:04 GMT

In your case, the basis of your rollover IRA is the total of non-deductible contributions you made into your IRA. The amount of your basis is not taxable upon distribution.

topic IRS Form 8606 in Investors & landlords

IRS Form 8606

Re: IRS Form 8606