Form 8606

Department of the Treasury
Internal Revenue Service

Nondeductible IRA Contributions,
IRA Basis, and Nontaxable IRA Distributions

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

OMB No. 1545-1007

1988

Attachment
Sequence No. 86

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

Your social security number

Fill In Your Address

Present home address (number and street) (or P.O. Box number if mail is not delivered to street address)

Only If You Are Not
Filing a Tax Return

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

1 nter istee and value of all your ist if more than three)—
Nowe at tastes (hank credit union, otal tta ate) three) Value on 12/31/88
a la
b 1b
c 1c
2 Total value of all IRAs. Add lines 1a through 1c . 2
3 Enter the basis in your IRA(s) as of 12/31/87. This is the amount shown on line 13 of your 1987 Form 3
8606 .
4 Enter your nondeduetible IRA contributions for 1987 that were , made during 1/1/e8- 4/15/88.1 This is
the amount shown on line 4 of your 1987 Form 8606 4
5 Enter your IRA contributions for 1988 that you choose to be nondeductible. (Include those ‘made
during 1/1/89-4/17/89 that were for 1988.) (See instructions.) . Boe ee LB
6 Add lines 3, 4, and 5 and enter the total . 6
7 Enter only those contributions included on line 5 that were made during 1/1/89- 4/17/89. (This
amount may be the same as line 5 if all of your nondeductible contributions for 1988 were made in
1989 by 4/17/89.) (See instructions.) 2
8 Subtract line 7 from line 6 and enter the result . 8
9 Adjustments. (See instructions.) a)
10 Combine lines 8 and 9 and enter the result. if you did not receive any ‘IRA distributions (withdrawals) i in
1988, skip lines 11 through 15 and enter the amount (or zero, if applicable) from line 10 on line 16 . 10
11 Enter the value of all your IRAs as of 12/31/88 (from line 2). Include any
outstanding rollovers. (See instructions.) . 11
12 Enter total IRA distributions received during 1988. Do not include
amounts rolled over before 1/1/89. (See instructions.) . 42
13 Add lines 11 and 12 and enter the total . 13
14 _ Divide line 10 by line 13 and enter the result as a decimal (to at least two places) 14
15 Multiply line 12 by the decimal amount on line 14 and enter the result. This is the amount of your
nontaxable distributions for 1988. (See instructions.) . » » 15
16 Subtract line 15 from line 10 and enter the result. This is the basis in your IRA(s) a as of 12/31/88 >| 16

Sign Here Only If
You Are Not Filing

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

a Tax Return Your signature

Y

Date

General Instructions

Note: /f you made a nondeductible
contribution in 1987, do not fill out this
form unless you meet one of the
requirements under Who Must File.

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 . . 28 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 IRS or the
Office of Management and Budget at the
addresses listed in the instructions of the
tax return with which this form is filed.
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 applies to you. Then enter on line
5 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 made
nondeductible contributions in 1987 or
1988, also use Form 8606 to figure the
nontaxable portion of any IRA distributions
you receive. If you received any
distributions in 1988, line 15 will show the
amount that is not taxable.

Who Must File.—You must file Form 8606.
for 1988 if:

e You made nondeductible contributions to
your IRA during 1988 for 1987 or 1988, or

Form 8606 (1988)


Form 8606 (1988)

Page 2

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

@ You received IRA distributions in 1988
and you made nondeductible contributions
to your IRA.

If you and your spouse each choose to
make nondeductible IRA contributions, you
each must file a Form 8606.

Report your deductible contributions on
Form 1040, Form 1040A, or Form 1040NR
but not on Form 8606.

When and Where To File.—Attach Form
8606 to your 1988 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
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;

@ 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.

Specific Instructions

Line 1.—Separately list all of your IRAs and
their values at the end of the year,
regardless of whether you make deductible
or nondeductible contributions to them. For
married couples, each spouse must list his
or her own IRA(s) on a separate Form 8606.

If you have more than three IRAs, list
them ona separate attachment and follow
the format of line 1. Include on line 2 the
total value of all of your IRAs.

You should receive a statement by
January 31, 1989, for each IRA account
showing the value on December 31, 1988.
Line 5—Covered by a Retirement
Plan at Work.—If you were covered by
a retirement plan at work and used
Worksheet 2 in the Instructions for

Form 1040 or Form 1040A, you should
enter on line 5 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, you
should complete a separate Form 8606
for your spouse and enter on line 5 of
your spouse's Form 8606 any
nondeductible contributions for your
nonworking spouse from the
appropriate lines of Worksheet 2.

If you were covered by a retirement plan
at work but you used Worksheet 1 because
your income was $25,000 or less ($40,000
or less if you are married filing a joint return
or a qualifying widow(er)), follow the
instructions below under “Not Covered by a
Retirement Plan at Work.”

You may also choose to treat any part of
deductible contributions as nondeductible.
To do this, include on line 5 of Form 8606
any deductible contributions that you are
treating as nondeductible.

Note: You cannot take a deduction for any
part of the deductible contributions you are
treating as nondeductible.

If none of your contributions are
deductible and you did not use Worksheet 1
or 2 in the Form 1040 or 1040A
Instructions, you may still choose to make a
nondeductible contribution up toa
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 5 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 5 of your
Form 8606 the total nondeductible
contributions that you are making to your
IRA. Enter the balance on line 5 of your
nonworking spouse's Form 8606. You
cannot contribute more than $2,000 to
either your 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.

Not Covered by a Retirement Plan at
Work.—'f you were not covered by a
retirement plan at work or were covered,
but had income of $25,000 or less
($40,000 or less if married filing a joint
return or a qualifying widow(er)), complete
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 5 of your Form 8606 the difference
between the amount you are deducting and
the amount shown on line 3 of Worksheet 1.

If 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 5 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 7.—\f you made contributions both in
1988 and 1989 that are for 1988, you may
choose to apply the contributions made in
1988 first to nondeductible contributions
and then to deductible contributions, or vice
versa. However, you may not apply to
nondeductible contributions more than the
amount actually made in 1988.

For example, assume you make contributions
of $1,000 in 1988, and $1,000 in 1989.
Assume further that $1,500 of your
contributions are deductible and $500 are
nondeductible. You choose $500 of your
contribution in 1988 to be nondeductible. In
this case, the $500 would be entered on line
5 instead of line 7 and would become part of
your basis for 1988. Otherwise, the amount
would be entered on line 7.

Line 8.—Although the 1988 IRA
contributions you made during 1/1/89-
4/17/89 (line 7) can be treated as
nondeductible (for purposes of line 5), these
amounts are not included in your basis for
1988. This is the reason you subtract the
amount on line 7 from the amount on line 6.
The amount on line 7 will be included in
basis on your 1989 Form 8606.

Line 9.—Use this line if you wish to change
a nondeductible contribution made ona
prior year’s return to a deductible
contribution, or vice versa. For example, if
you were eligible to deduct your IRA
contributions for 1988 but you chose to
treat them as nondeductible when you filed
your 1988 tax return, you can at a later date
change the designation to a deductible
contribution by filing an amended tax return
on Form 1040X, Amended U.S. Individual
Income Tax Return, and show the change in
designation on line 9 of Form 8606.

Line 11.—Enter the total value of all your
IRAs as of 12/31/88 from line 2. Include
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 1988 (between
November 2 and December 31) that you did
not roll over to another IRA by 12/31/88,
but that you roll over to another IRA in 1989
within the normal 60-day rollover period.
Line 12.—Do not include any distributions
that were: (1) received in 1988 that you
rolled over to another IRA by 12/31/88; (2)
outstanding rollovers included on line 11;
(3) contributions under Internal Revenue
Code section 408(d)(4) that were returned
to you before the due date of the return; or
(4) excess contributions made under
Internal Revenue Code section 408(d)(5).
Line 15.—The amount shown on this line is
your nontaxable IRA distribution for 1988.
Subtract this amount from your total
distributions shown on line 12. The
difference is your taxable distributions to be
reported on Form 1040, line 16b.

Line 16.—This is the basis in your IRA as of
12/31/88. This amount will be used on
Form 8606 in future years if you make
nondeductible IRA contributions or receive
distributions in those years.