8606 | Form 8606

Definition

Form 8606 (or IRS Form 8606). Nondeductible IRAs, should be filed if the IRA owner does any of the following :

Made nondeductible contributions to a traditional IRA for the year, including a repayment of a reservist distribution.
Received distributions from a traditional IRA, SEP IRA, or SIMPLE IRA during the year and his/her basis in his traditional IRAs and/or SEP IRAs is more than zero. For this purpose, a distribution does not include a rollover, qualified charitable distribution, a one-time distribution to fund an HSA, conversion, recharacterization, or return of certain contributions.
Converted an amount from a traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA during the year (unless he/she recharacterized the entire conversion).
Received distributions from a Roth IRA during the year (other than a rollover, recharacterization, or return of certain contributions).
Made a repayment of a qualified hurricane distribution that is attributable to previously nondeductible contributions.
Recharacterized less than 100% of a contribution or Roth conversion

Notes:

If the IRA owner recharacterized a Roth IRA contribution as a traditional IRA contribution, or vice versa, he/she should treat the contribution as having been made to the second IRA, not the first IRA
For purposes of Form 8606, a traditional IRA is an individual retirement account or an individual retirement annuity other than a SEP IRA, SIMPLE IRA, or Roth IRA.

An IRA owner does not have to file Form 8606 solely to report regular contributions to Roth IRAs.
Form 8606 should be filed with the IRA owner’s Form 1040, 1040A, or 1040NR. If the individual is not required to file an income tax return but is required to file Form 8606, he/she should sign Form 8606 and send it to the Internal Revenue Service at the same time and place that Form 1040, 1040A, or 1040NR would otherwise be filed
Amending Form 8606 : After the IRA owner files his/her return, he/she can change a nondeductible contribution to a traditional IRA to a deductible contribution or vice versa. If necessary, a new Form 8606 must be completed (showing the revised information) and filed with Form 1040X, Amended U.S. Individual Income Tax Return.
Penalty for Not Filing : If the IRA owner is required to file Form 8606 to report a nondeductible contribution that he/she made to a traditional IRA, but does not do so, he/she must pay a $50 penalty, unless he/she can show reasonable cause for not filing the form
Overstatement Penalty: If the IRA owner overstates the nondeductible contributions, he/she must pay a $100 penalty, unless reasonable cause can be shown.
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