If an individual makes contributions to a traditional IRA during the year, those contributions are generally tax-deductible. However, in certain circumstances, the deduction may be reduced or eliminated completely.
If a Taxpayer makes contributions that are not deductible, it is very important that the Taxpayer tracks their basis in the traditional IRA using IRS Form 8606.
In this video we will cover the following issues:
1. Under what circumstances is IRS Form 8606 necessary.
2. What are the thresholds for deductions.
3. Why is it important to track your basis in Traditional IRAs.
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DISCLAIMER: I am a licensed attorney and certified public accountant (CPA) in the State of Florida. I am not a financial advisor. The information provided in this video is for entertainment purposes only. No such communication is provided in the course of an attorney-client relationship, and no communication is intended to constitute legal advice. You should speak with your own tax and legal professionals to discuss your circumstances before performing any of the tax, legal or accounting strategies demonstrated in this video. This description includes links to affiliates. I may earn a commission or referral bonus if you use these links to purchase products or services from the providers. Thank you.
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For a traditional IRA with a positive basis at retirement, complete Form 8606 to calculate how much of the distribution is subject to taxes.
https://youtu.be/IElAs_Hcw7I
there is no info anywhere where to mail the form
Thanks for the informative video, does this also mostly apply for a Roth IRA?
Good day
What happens if I am cover with a pension plan but my husband does not. Income $117,000 for tax 2021, what would be the partial amount?
Also this go on tax return 8606 and Schedule 1?
Thank you
100% of the contributions in my IRA came from post tax dollars. What lines on the form to I complete to say 100% of the funds are not taxable upon withdrawal? $2500.00 for example. Great information in the video, but I was expecting help filling out the form – what goes where. Thanks!
So because I have a separate employer-sponsored (NOT FUNDED) 403b, my INDIVIDUAL Roth IRA qualified distributions are now taxed? I'm so confused.
Hi knott, I recently converted all my traditional IRA to Roth. I have also requested a tax extension for 2020. When it comes to contributions, can I still claim my 2020 contribution on my taxes return? Or do I have to wait until 2021 because the convention was made this year? I don’t want to miss out on 2020 contributions. Thank you.
Is it correct to complete only Part 2 of form 8606? If the answer is yes, please explain part II, line 17.
All past years' contributions to IRA were deducted on my tax returns. In year 2020 I did the following:
Contributed the max amount to Roth account; Converted a small amount of IRA to Roth (my first conversion.) I have no retirement plan with employer.
if an individual is only employed with a W2 job that offers 401k for January and switched to 1099 job that offers no retirement plan for the remainder of the year, he will still be limited on the deductibility for that one month correct? is there anyway we can take out the non deductible portion of the contribution?? thank you for the info!
If I made an excess contribution in nondeductible traditional IRA, do I include the excess on Line 1 of Form 8606 as well? For example, I contributed $6100 in 2020 as non-deductible contribution to Traditional IRA and I'm deciding to leave $100 excess in the account and pay the 6% penalty. I will need to fill out Form 5329, but do I show $6100 on Form 8606? I plan to carry forward $100 excess to future years once I can apply it 2022. (I already maxed out my 2021 contribution limit so I can't carry it into 2021 either).
I filed my 2019 taxes in February of 2020, and got my tax return. I then decided to contribute $6000 + $6000 to a traditional IRA for the 2019 and 2020 year in April. I quickly did a conversion to roth IRA (doing a backdoor). On this years tax returns, how do I report my 2019 and 2020 contributions plus the 2020 conversion of both amounts. Do I need to do an amendment for my 2019 tax returns if the contributions were non-deductable? I am also using TurboTax, so the forms are quite confusing since they only use a questionnaire format.
Hello, I have contributed to maximum to Traditional IRA every year without taking deductions and rolled over to ROTH IRA(backdoor entry). My question is whether I will have any basis in Traditional and ROTH IRA? I Need to enter that information in my 8606 form.
One drawback is can only take the principle that was tax free out as percent of total traditional IRAs. While the principle was after tax you wont recover that for years. But you get tax deferred growth from principle.
Does the IRS track the 8606 filings? Can you obtain accumulated figures somehow? How would you handle 1099-R income for someone who doesn't know if they have basis, and you don't have any history or knowledge with them? Would you just treat it as taxable? Would the IRS make an adjustment if something was off and 8606 was not reported on subsequent withdrawals?
That was brilliant. I've come across basis a number of times, but no one ever so clearly said that tracking it helps you avoid getting double-taxed. So I get it for the Traditional IRA now. Basis is any amount you've paid taxes on. Does that mean that for a Roth IRA my basis is whatever contributions I have made, since they are all after tax? Do I have to track it the same way, or is that a different form?
Good info. I never heard on non deductable IRA.
I have a question, I contributed max allowed amount to employer 401k in year 2020, still can I contribute 7k to non deductible IRA now?