Nondeductible IRA Contributions,
IRA Basis, and Nontaxable IRA Distributions

> Please see Recordkeeping Requirements on the back.
» Attach to Form 1040, Form 1040A, or Form 1040NR.

Form 8606

Department of the Treasury
Internal Revenue Service

OMB No. 1545-1007

1989

Attachment
sequence No, 86.

Name (If married, file a separate Form 8606 for each spouse. See instructions.)

Your social security number

Home address (number and street, or P.O. box if mail is not delivered to your home)

Fill In Your Address Only
If You Are Filing This

Apt. no,

Form by Itself and Not
with Your Tax Return

City, town or post office, state, and ZIP code

1 Enter the total value of ALL your IRAs as of 12/31/89. (See instructions.) . 1 7]
2 Enter your IRA contributions for 1989 that you choose to be nondeductible. Include those made during
1/1/90-4/16/90 that were for 1989. (See instructions.) toe wee LB
3 Enter your total IRA basis for 1988 and 1987. (See instructions.) . wo . 3
4 Add lines 2 and 3 and enter the total. If you did not receive any IRA distributions = thal in
1989, skip lines 5 through 13 and enter this amount on line 14 a . (4
5 Enter only those contributions included on line 2 that were made during 1/1/90- 4/16/90. Chis
amount will be the same as line 2 if all of your nondeductible contributions for 1989 were made in
1990 by 4/16/90.) (See instructions.) . 5
6 Subtract line 5 from line 4 and enter the result . a 6
7 Enter the amount from line 1 plus any outstanding rollovers, ‘(Gee
instructions.). woe 7
8 Enter total IRA distributions received “during 1989, Do not “include
amounts rolled over before 1/1/90. (See instructions.) . . . . . . .-8
9 Add lines 7 and 8 and enter the total . . -L9
10 _ Divide line 6 by line 9 and enter the result as a decimal (to at least | two places) . 10 2
11 Multiply line 8 by the decimal amount on line 10 and enter the result. This is the amount of your
nontaxable distributions for 1989. (See instructions.) . eee
12 Subtract line 11 from line 6 and enter the result. This is the basis in your IRA(s) as of 12/31/89 . . pt
13 Enter the amount, if any, fromline5 . . . . (33
14 Add lines 12 and 13. This is the amount of your ‘total IRA basis for 1989 and prior years . -. . P14

Sign Here Only If You
Are Filing This Form
by Itself and Not with

Under penalties of perjury, | declare that | have examined this form, including accompanying attachments, and to the best of
my knowledge and belief, it s true, correct, and complete.

Y

Your Tax Return

Your signature

Date

Paperwork Reduction Act Notice.—We
ask for this information to carry out the
Internal Revenue laws of the United States.
We need it to ensure that taxpayers are
complying with these laws and to allow us to
figure and collect the right amount of tax.
You are required to give us this information.

The time needed to complete and file this
form will vary depending on individual
circumstances. The estimated average time
is:

Recordkeeping . 26 minutes
Learning about the law

or the form . 7 minutes
Preparing the form . . 21 minutes
Copying, assembling, and

sending the form to IRS . 20 minutes

If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form more
simple, we would be happy to hear from
you. You can write to either the Internal
Revenue Service, Washington, DC 20224,
Attention: IRS Reports Clearance Officer,
T:FP; or the Office of Management and

Budget, Paperwork Reduction Project
(1545-1007), Washington, DC 20503.

A Change You Should Note

Penalty for Not Filing Form 8606.—A
change in the law provides for a penalty if
you make nondeductible IRA contributions
and do not file Form 8606. You will have to
pay a $50 penalty for each failure to file
Form 8606, unless you can show that the
failure to file was due to reasonable cause.

General Instructions

Purpose of Form.—You must use Form
8606 to report the amount of your IRA
contributions that you choose to be
nondeductible. You may wish to make
nondeductible contributions, for example, if
all or part of your contributions are not
deductible because of the income
limitations for IRAs. First, figure the amount
of your deductible contributions using the
Instructions for Form 1040 or Form 1040A,
whichever apply to you. Report the
deductible contributions on Form 1040,
Form 1040A, or Form 1040NR. Then enter
‘on line 2 of Form 8606 the amount you
choose to be nondeductible.

The part of any distributions you receive
attributable to nondeductible contributions
will not be taxable. If you have at any time
made nondeductible contributions, also use
Form 8606 to figure the nontaxable part of
any IRA distributions you received in 1989.
Line 11 will show the amount that is not
taxable.

Who Must File.—You must file Form 8606
for 1989 if:

You made nondeductible contributions to
your IRA for 1989, or

You made nondeductible contributions to
your IRA for 1988 during 1989, or

@ You received IRA distributions in 1989
and you have at any time made
nondeductible contributions to any of your
IRA(s).

When and Where To File. —Attach Form
8606 to your 1989 Form 1040, Form
1040A, or Form 1040NR.

If you are required to complete Form
8606, but you do not have to file an income
tax return because you do not meet the
requirements for filing a return, you still
have to file a Form 8606 with the Internal
Revenue Service at the time and place you

Form 8606 (1989)


Form 8606 (1989)

Page 2

would normally be required to file Form
1040, Form 1040A, or Form 1040NR.
Name and Social Security Number. —
Enter your name and social security number
‘on Form 8606.

Note: /f you file a joint return on Form 1040
or Form 1040A, show the name and social
security number of the spouse whose IRA
information is shown.

Recordkeeping Requirements.—To be
able to verify the nontaxable part of
distributions from your IRA, keep a copy of
this form together with copies of the
following forms and records until all
distributions are made from your IRA(s):

@ Forms 1040 (or Forms 1040A or Forms
1040NR) filed for each year you make a
nondeductible contribution;

@ Forms 5498 or similar statements
received each year showing contributions
you made;

e Forms 5498 or similar statements you
received showing the value of your IRA(s)
for each year you received a distribution;
and

@ Forms 1099-R and W-2P received for
each year you received a distribution.
Additional Information.—For more
information on nondeductible contributions,
get Pub. 590, Individual Retirement
Arrangements (IRAs).

Penalty for Overstatement.—If you
overstate your nondeductible contributions
on this form for any tax year, you must pay a
penalty of $100 for each overstatement,
unless it was due to reasonable cause.
Amending Form 8606.—After you file
your return, you may change, if you wish, a
nondeductible contribution made on a prior
year’s return to a deductible contribution or
vice versa, To do this, fill out a new Form
8606 showing the revised information and
attach it to Form 1040X, Amended U.S.
Individual Income Tax Return. Send both of
these forms to the Internal Revenue Service
Center shown in the Form 1040X
instructions for your area.

Specific Instructions

Note: /f you made nondeductible
contributions for 1989 and you also
received an IRA distribution in 1989, you
may have to make a special computation
before filling out this form. Get Pub. 590 for
further details. If you have to make the
special computation, Pub. 590 will tell you
the lines on Form 8606 that you must fill
out.

Line 1.—Enter the total value of ALL your
IRAs as of 12/31/89. You should receive a
statement by January 31, 1990, for each
IRA account showing the value on
12/31/89.

Line 2.— If you used Worksheet 2 in the
Instructions for Form 1040 or Form
1040A, enter on line 2 of Form 8606 any
nondeductible contributions shown on line
10 of the worksheet in the Form 1040
Instructions or line 8 of the Form 1040A
Instructions . If you made any

nondeductible contributions to an IRA for
your nonworking spouse, complete a
separate Form 8606 for your spouse. Then
enter on line 2 of your spouse’s Form 8606
any nondeductible contributions for your
nonworking spouse from the appropriate
lines of Worksheet 2.

You may also choose to treat any part of
deductible contributions as nondeductible.
To do this, include on line 2 of Form 8606
any deductible contributions that you are
treating as nondeductible.

Note: You cannot take a deduction for the
amount on line 2.

If none of your contributions are
deductible, you may still choose to make a
nondeductible contribution up to a
maximum of $2,000 (but not more than
your earned income). Enter the amount of
your contributions that you are treating as
nondeductible on line 2 of Form 8606.

If contributions were also made to an IRA
for your nonworking spouse and none of the
contributions are deductible, you may still
make nondeductible contributions up toa
maximum of $2,250 (but not more than
your earned income). Enter on line 2 of your
Form 8606 the total nondeductible
contributions that you are making to your
IRA. Enter the balance on line 2 of your
nonworking spouse's Form 8606. You
cannot contribute more than $2,000 to
either your IRA or your spouse's IRA. Also,
the total of the two amounts cannot be
more than $2,250 and not more than your
earned income.

If you used Worksheet 1 in the
Instructions for Form 1040 or Form
1040A, the amount shown on line 3 of the
worksheet is the amount of your
contributions that you may deduct.
However, you may choose to make all or
part of that amount nondeductible. Enter on
line 2 of your Form 8606 the difference
between the amount you are deducting and
the amount shown on line 3 of Worksheet 1.

lf contributions were made to an IRA for
your nonworking spouse, the amount shown
on line 8 of Worksheet 1 is the amount of
the allowable deduction for your
nonworking spouse’s IRA. However, you can
treat all or part of that amount as
nondeductible. Enter on line 2 of your
nonworking spouse's Form 8606 the
difference between the amount that is
deducted for your nonworking spouse and
the amount on line 8 of Worksheet 1.

Line 3.— Your total IRA basis for 1988 and
1987 is the total of all your nondeductible
IRA contributions for 1988 and 1987 that
have been reduced by any nontaxable IRA
distributions received in those years. If this
is the first year you are required to file Form
8606, enter -0-. Otherwise, enter the total
of the amounts from lines 7 and 16 of your
1988 Form 8606. Or, if you did not file a
1988 Form 8606, enter the total of the
amounts from lines 4 and 13 of your 1987
Form 8606.

Line 5.—If you made contributions both in
1989 and 1990 that are for 1989, you may
choose to apply the contributions made in

1989 first to nondeductible contributions
and then to deductible contributions, or vice
versa. However, the amount on line 2 minus
the amount on line 5 cannot be more than
the RA contributions you actually made in

1 .

Example. You made contributions of
$1,000 in 1989, and $1,000 in 1990.
$1,500 of your contributions are deductible
and $500 are nondeductible. You choose
$500 of your contribution in 1989 to be
nondeductible. In this case, the $500 would
be entered on line 2, but not on line 5, and
would become part of your basis for 1989.
Line 6.—Although the 1989 IRA
contributions you made during 1/1/90-
4/16/90 (line 5) can be treated as
nondeductible for purposes of line 2, these
amounts are not included in your basis. This
is the reason you subtract the amount on
line 5 from the amount on line 4.

Line 7.—Enter the amount from line 1 plus
any outstanding rollovers. A rollover is a
tax-free distribution from one IRA which is
then contributed to another IRA. The
rollover contribution must be made within
60 days of receiving the distribution from
the first IRA. An outstanding rollover is any
amount distributed to you from one IRA.
within 60 days of the end of 1989 (between
November 2 and December 31) that you did
not roll over to another IRA by 12/31/89,
but that you roll over to another IRA in 1990
within the normal 60-day rollover period.

If you do not have any outstanding
rollovers, line 7 will be the same as line 1.

Line 8.—Do not include any distributions
that were: (1) received in 1989 that you
rolled over to another IRA by 12/31/89; (2)
outstanding rollovers included on line 7; (3)
contributions under Internal Revenue Code
section 408(d)(4) that were returned to you
on or before the due date of the return; or
(4) excess contributions made under
Internal Revenue Code section 408(d)(5)
that were returned to you after the due date
of the return.

Line 11.—This is the amount of your
nontaxable IRA distributions for 1989.
Subtract this amount from your total
distributions shown on line 8. The
difference is your taxable distributions to be
reported on Form 1040, line 16b.

Line 12.—The basis in your IRA as of
12/31/89 is the total of your nondeductible
IRA contributions made in 1989 and prior
years that have been reduced by any
nontaxable IRA distributions received in
those years. Once you have basis in your
IRA(s), part of each subsequent IRA
distribution will be nontaxable until you run
out of basis.

Line 14.— Your total IRA basis for 1989
and prior years includes your IRA basis as of
12/31/89 and any nondeductible IRA
contributions for 1989 that you made in
1990 by 4/16/90. This amount will be used
on Form 8606 in future years if you make
nondeductible IRA contributions or receive
distributions in future years.