Preparing Form 8606, Nondeductible IRAs: Reporting IRA Withdrawals and Roth Conversions, Handling Unfiled Forms

Form 8606, Nondeductible IRAs, serves many purposes: reporting and accumulating nondeductible contributions to IRAs, calculating the taxable portion of IRA distributions, and reporting Roth conversions. Recharacterizations, transfers made incident to divorce, or QCDs (qualified charitable distributions) can create the need to file Form 8606.

Before the 1986 Tax Reform Act, all IRA contributions were pretax. Hence in 1987, the co-mingling of deductible and nondeductible contributions began. Taxpayers have accumulated pre- and post-tax contributions in multiple accounts at multiple institutions throughout the years and now are making these withdrawals. Since you cannot withdraw and pay tax on post-tax funds exclusively, even when the funds are held separately, calculating the taxable portion of a withdrawal can be a formidable task. Often forms for previous years either have not been filed or are not easily accessible.

Although the taxpayer benefits from filing the form, there is a $50 penalty for non-filing and a $100 penalty for overstating a nondeductible contribution. Tax practitioners working with taxpayers making individual retirement contributions need to understand the complexities of this form.

Listen as Lawrence K.Y. Pon, CPA/PFS, CFP, EA, USTCP, AEP at Pon & Associates, explains how to correctly complete Form 8606 for Roth conversions, IRA withdrawals, and recharacterizations of contributions.

1. Form 8606: introduction
2. Nondeductible contributions and limits
3. Distributions
   1. Traditional, SEP, and SIMPLE
   2. Nondeductible and Roth
   3. Inherited IRAs
4. Roth conversions from traditional, SEP, and SIMPLE IRAs
5. Recharacterizations
6. Unfiled or incorrect filings

Our panelist will review these and other critical issues:

• Calculating the taxable portion of an IRA withdrawal of deductible and nondeductible contributions
• How to handle unfiled Form 8606s from prior years
• How to obtain information on nondeductible contributions from prior years
• Reporting a Roth conversion on Form 8606

Learning Objectives

After completing this course, you will be able to:

• Determine potential penalties for not filing Form 8606 when required
• Identify taxpayers who must file Form 8606, Nondeductible IRAs
• Decide when to file Form 8606 for recharacterizations
• Ascertain how to obtain prior-year Forms 8606 for taxpayers

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of individual income taxation, including itemized deductions, individual income tax credits, net operating loss limitations including carrybacks and carryforwards.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).