Instructions for Filling Out Form 8606

This document provides a comprehensive guide on completing Form 8606 for the year 2023, which is used for reporting nondeductible contributions to traditional IRAs, distributions from traditional, SEP, or SIMPLE IRAs if you have a basis in these IRAs, conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs, and distributions from Roth IRAs. The guide includes introductory material, general instructions, and specific instructions for each part of the form.

In this article, we'll provide information on Form 8606 and a step-by-step guide on how to fill it out.

What is Form 8606?

Form 8606 is a tax document used to report various IRA-related transactions, including nondeductible contributions to traditional IRAs, distributions from traditional, SEP, or SIMPLE IRAs with a basis, conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs, and distributions from Roth IRAs. The form serves to track the basis in traditional IRAs, preventing double taxation, and helps calculate the taxable portion of IRA distributions. It also contains instructions for reporting Roth IRA conversions and distributions. Notably, recent updates introduced Roth accounts for SEP and SIMPLE IRAs, as per the Secure 2.0 Act of 2022. Penalties may apply for not filing Form 8606 when required or for overstating nondeductible contributions.

Who Must File Form 8606?

Individuals who need to file Form 8606 include those who made nondeductible contributions to a traditional IRA for 2023, received distributions from a traditional, SEP, or SIMPLE IRA in 2023 and have a basis in these IRAs, converted amounts from a traditional, SEP, or SIMPLE IRA to a Roth IRA in 2023, received distributions from a Roth IRA in 2023, transferred part or all of their IRA to a spouse under a divorce or separation agreement resulting in a change in the IRA's basis, or received a distribution from an inherited IRA with a basis or from an inherited Roth IRA that wasn't a qualified distribution.

Form 8606 Tax Filing Deadlines and Due Dates

• Due date for making contributions for 2023 to an IRA: Monday, April 15, 2024
• Due date for filing Form 8606: Same as the due date for the taxpayer's income tax return, including extensions
• If not required to file an income tax return but need to file Form 8606: Sign and send Form 8606 to the IRS at the same time and place as the income tax return would be filed

Form 8606 Late Payment Penalty

If you fail to file Form 8606 when required, you may face a penalty of $50, unless you can demonstrate a reasonable cause for not filing. Additionally, if you overstate your nondeductible contributions, you could be subject to a $100 penalty, again, unless you can show reasonable cause for the overstatement.

Step-by-Step Instructions for Form 8606

Here are the step-by-step instructions for filling out Form 8606:

1. Name and Social Security Number (SSN): Enter the name and SSN of the individual whose information is being reported on Form 8606.
2. Part I - Nondeductible Contributions to Traditional IRAs and Distributions From Traditional, SEP, and SIMPLE IRAs:
   • Line 1: Enter your nondeductible contributions to traditional IRAs for the year.
   • Line 2: Enter your total basis in traditional IRAs from previous years.
   • Line 3-8: Follow the instructions for each line to calculate the taxable part of IRA distributions and conversions.
3. Part II - Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs:
   • Line 16-18: Enter the amounts related to conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs.
4. Part III - Distributions From Roth IRAs:
   • Line 19-25: Calculate the taxable part, if any, of distributions from Roth IRAs.
5. Attachments and Signatures: Attach any required statements or additional information as instructed throughout the form. Sign and date the form if filing separately from your tax return.
6. Filing: File Form 8606 with your tax return or separately if not required to file a tax return for the year. Follow the instructions for mailing addresses or electronic filing options.

This summary provides a general overview. For detailed instructions, including how to handle specific situations like recharacterizations, returns of contributions, and disaster-related issues, refer to the full instructions provided on the IRS website.

How to Submit Form 8606

To submit Form 8606, file it with your 2023 Form 1040, 1040-SR, or 1040-NR by the due date, including extensions, of your return. Ensure you meet the criteria for who must file, accurately report all required information, and be aware of the deadlines for making contributions and filing the form to avoid penalties. Follow the specific instructions for each part of the form, and remember to include your name and social security number (SSN) on the form.

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