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September 27, 2022

Should I File Form 8606 every year?


Should I File Form 8606 every year?

Question: Filing Form 8606 I made a nondeductible contribution to my traditional IRA two years ago. I have not made an IRA contribution since then. I know I should file IRS Form 8606 for the contribution. Should the Form 8606 also be filed for every year after?

Answer by Denise Appleby: It depends. IRS Form 8606 is used to track the basis (after-tax amounts) in your IRA. Once you make a nondeductible contribution or roll over any after-tax amount to your traditional IRA, any subsequent distribution or Roth conversion will include a pro-rated amount of your pre-tax and after-tax balance. For this purpose, all your traditional, SEP and SIMPLE IRAs are aggregated and treated as one.

Therefore, if you took any distribution or made a Roth IRA conversion from any traditional IRA, SEP IRA or SIMPLE IRA that you own, you must file IRS Form 8606 for those distributions or Roth conversions. The Form 8606 will let you and the IRS know how much of the distribution or Roth conversion is taxable.

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