Form 8606 - A few questions

[richardR1]

We have been collecting and saving our 8606s for multiple years.

The only time i have seen some benefits is hen doing Roth conversions, TurboTax calculates an amount not taxable, and reduces the total basis by that amount.

How else do those numbers help? I asked my advisor that when RMDs are due, does the basis help and he said no.

So where else do I have benefit of the taxable basis dollars for my wife and I as we have separate amounts

Is there  YouTube or podcast anyone can recommend?

Thanks

[MaryK4]

If you make nondeductible contributions to your traditional IRA, you must file an 8606 for that year.  If you do not, the IRS will treat your entire contribution as if it was deductible even if you did not deduct it so when you withdraw the money it will all be taxable income (no basis).  See Form 8606 and What is IRS Form 8606: Nondeductible IRAs - TurboTax - Intuit.

I did not see any podcasts on the 8606 specifically; but if find any helpful podcasts, I will add to this post.

[baldietax]

Re "How else do those numbers help? I asked my advisor that when RMDs are due, does the basis help and he said no."...

Having a basis in the IRA should reduce how much of the RMD is taxed, the same way it does for Roth conversions.  Your non-deductible contributions i.e. "basis" in the IRA is "after tax" money you were able to contribute to the IRA to defer taxes on earnings from those contributions.  This "basis" portion of the IRA is not taxable when its withdrawn, and this applies to any distribution just as it does in Roth case.  Form 8606 will calculate what portion of any distribution and/or rollover is taxable and what is not, and reduce your basis accordingly.

IRS Pub 590 may be helpful read, see section "Distributions Fully or Partly Taxable".

https://www.irs.gov/pub/irs-pdf/p590b.pdf

Not a CPA/expert but just my 2 cents, hope this helps - suggest a further conversation with your advisor on this topic.

[dmertz]

Your basis in nondeductible contributions is not a factor in determining the size of your RMDs.  It is a factor in determining the taxable amount of your RMDs (unless your entire RMD goes to making QCDs), calculated on Part I of Form 8606.

[Opus 17]

If you want to prove, when you retire, that part of your IRA withdrawal is non-taxable because you made non-deductible contributions, then you need your form 8606s.  Without them, your entire IRA withdrawal is taxable, even though you already paid tax on some of the contributions, because the IRS does not keep track for you.  

Likewise, if you want to do a Roth IRA conversion, you need the form 8606 to prove that part of the conversion is non-taxable.  Without them, you will pay tax on the entire converted amount, even though you already paid tax on some of the contributions, because the IRS does not keep track for you. 

[maggie031]

If I understand the previous comment, then what is on the 8606 matters and I should be tracking my Roth conversions.  However, TurboTax is not giving me any opportunity to declare which portion of my ira distributions in 2025 were just distributions (e.g., cash) and which were Roth conversions. 

Is this going to cause trouble down the line (e.g., when I start to withdraw from the Roth) if everything shows up a regular distribution? 

[baldietax]

TT does ask this and it is reflected on different lines on Form 8606.  Not sure all the ramifications, but certainly matters in terms of penalties if you are doing Roth IRA conversion before age 59.5 which would not be penalized vs. taking an early distribution (the 1099-R will be coded differently in Box 7 also I think).

After inputting the 1099-R there should be an interview question which starts "what did you do with the money..", you select "I moved the money to another retirement account", then "I did a combination of rolling over, converting or cashing out the money" and then you can specify the amount converted to Roth IRA.  This will flow to Line 8 on your Form 8606 etc.

[maggie031]

Turbotax never asked me any interview questions about the 1099-R form.  I did not input the 1099-R directly, but rather had it automatically downloaded from my brokerage account  (Vanguard FWIW).

Maybe I should try deleting what is there now and then hand-entering the information?

thanks,

Maggie

[baldietax]

Ah I don't use import at all, not worth the hassle and these type of issues on supplemental info the import can't handle (same with 1099-INT/DIV things like accrued interest, US Gov Obligations, Foreign Taxes etc).

You could try bringing up the 1099-R in edit/review, and then select continue, and that may take you back thru these questions; otherwise yes you may need to delete it and enter it manually to make sure everything has been properly triggered, it doesn't take long to do with these 1099s.  Be sure to review the outcome on Form 8606 especially if you have a basis in the IRA it will calculate the taxable amount and take down your basis.

[maggie031]

Sorry, I meant to say that TT did not ask me any interview questions regarding where I was putting the money.  I did see some questions regarding whether the contribution was made by my employer, did I inherit the IRA, did I put the money in an HSA, withdrawal due to a 2023/2024 qualified disaster  (no to all).

So I tried inputing a 1099-R info directly.  Got the same behavior as when I had the info sucked down over the internet.   So next I tried editing the info that was there (i.e., the data that was downloaded directly from the brokerage account).  This time I *did* get the question:  "What Did You Do With The Money from VANGUARD FIDUCIARY TRUST?"

After answering yes to that question, I was then prompted for the amount that was converted and things proceeded correctly  (as far as I can tell) from there. 

But thank you for pointing out that I should have been able to see the question about what I did with the money withdrawn.   Looks to me like TT has a bug.

[maggie031]

And thank you very much for your help, Baldie!

I will be re-thinking the import feature from now on.

Maggie