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

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Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, February 3, 2022

Recorded event now available

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This webinar will discuss filing Form 8606, Nondeductible IRAs, for annual nondeductible contributions, withdrawals, Roth conversions, and other scenarios. Our knowledgeable panelist will offer advice on handling unfiled prior-year forms and the tax reporting requirements for distributions to taxpayers who have made deductible and nondeductible IRA contributions.

Description

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.

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Outline

  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

Benefits

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

Faculty

Pon, Lawrence
Lawrence K.Y. Pon, CPA/PFS, CFP, EA, USTCP, AEP

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Pon & Associates

Mr. Pon has been in practice since 1986 providing comprehensive tax and financial planning, tax preparation and...  |  Read More

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