This worksheet first calculates the taxable portion of the traditional IRA distribution assuming that all of the traditional IRA contribution is nondeductible. This calculation is done beginning on the Taxable IRA Distributions Worksheet (accessible from the QuickZoom field at the bottom of Part I of Form 8606) according to the instructions provided in IRS Publication 590-B.

The taxable portion of the traditional IRA distribution depends on the amount of the traditional IRA contribution which is deductible.

The adjusted gross income depends on the taxable portion of the traditional IRA distribution.

The amount of the traditional IRA contribution which is deductible depends on the adjusted gross income.

This is necessary because of a cyclic condition where: If your client's traditional IRAs have a basis and he or she received a distribution from them, and your client also made a contribution to a traditional IRA which may be nondeductible because of coverage by an employer retirement plan, a special worksheet must be used to compute the taxable amount of the distribution. Part III of Form 8606 is used to compute the taxable amount of any distributions the person received from a Roth IRA

Part II of this form is used to compute the taxable amount of a conversion of a traditional IRA to a Roth IRA.

If your client converted all of their traditional IRAs to Roth IRAs and did not receive any traditional, SEP, or SIMPLE IRA distributions that were not converted, Part I of Form 8606 does not need to be completed.

It is also used to compute the taxable portion of any traditional, SEP, or SIMPLE IRA distribution if the traditional IRA has a basis.

Part I of Form 8606 is used to report any nondeductible traditional IRA contributions and compute the basis in the traditional IRA. Be sure to include the client's address and signature. If your client is not required to file Form 1040, file Form 8606 as you would Form 1040.

If Form 8606 is attached to Form 1040, a signature and address are not required. Form 8606 is used to report nondeductible contributions to traditional IRAs and to report distributions from traditional IRA with a basis and distributions from Roth IRAs.īecause married persons filing jointly must use separate Forms 8606, ProSeries provides a Form 8606 for both the taxpayer and spouse.

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