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About Form 8606, Nondeductible Iras | Internal Revenue Service: What You Should Know
A nondeductible IRA is an account created for compensation for personal expenses not eligible for the tax deduction for the IRA contribution. The purpose of the form is to simplify and reduce administrative burdens related to individuals who have to file separate tax returns for contributions, distributions, and distributions during a taxation year. A nondeductible IRA can be a tax-deferred investment fund such as a tax-advantaged mutual fund or an account controlled by a third party such as a brokerage firm or a corporation. It can also be a tax-deferred investment account like a 401(k) or an individual retirement account (IRA). Form 8606 is a new form filed quarterly by individuals who make nondeductible IRA contributions or participate in distributions of funds from their own IRAs. For purposes of IRS Form 8606, the term “Nondeductible IRA contributions” is used when the term “Nondeductible IRA distribution” is used and includes contributions, distributions from self-directed IRAs and certain payments by a custodian of an IRA if that custodian receives money from an individual who is or whose income is high enough to make the payment. A contribution to an IRA, in general, is made by a taxpayer and is taxable to the taxpayer, his/her beneficiary(s), and the self-employed. A distribution is an account that is transferred from a nondeductible IRA to another nondeductible IRA to pay for retirement compensation. The terms that are used in determining whether a transaction was part of an “IRS Form 8606” include: the type of financial institution in which the transaction took place and. the amount of money transferred, including the date on which the transaction occurs, with certain exceptions. Where to File Form 8606: Nondeductible IRA — Investopedia For more information on Form 8606, including the recent updates, see the following links: Form 8606 — IRS Form 8606: Form 8606: Frequently Asked Questions (FAQs) and Forms and Instructions Form 8606: What is IRS Form 8606 and When to File it? When is IRS Form 8606? The IRS issues Form 8606 to taxpayers who make income tax-deductible contributions to a tax-deferred retirement account or a tax-advantaged self-directed annuity trust, and have at least the current year's tax return information.
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