Question

Form 8606 - A few questions

Forum|Forum|1 year ago
January 27, 2025
4 replies
0 views

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

M

MAK70

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 This "basis" portion of the IRA is not taxable when its withdrawn, and this applies to any distribution just as it does in Roth case.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.

D

dmertz

Employee

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.

O

Opus 17

Employee

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.

M

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.