U.S. Individual Income Tax Return

2007 Instructions for Form 8606
Nondeductible IRAs
Purpose: This is the first circulated draft of the 2007 Instructions for Form 8606
for your review and comments. See below for a discussion of the major
changes.
TPCC Meeting: None, but one may be arranged if requested.
Prior Version: The 2006 Instructions for Form 8606 are available at:
http://www.irs.gov/pub/irs-pdf/i8606.pdf
Form: The 2007 Form 8606 was circulated earlier at:
http://taxforms.web.irs.gov/Products/Drafts/2007-2/07f8606_d1.pdf
Other Products: Circulations of draft tax forms, instructions, notices, and
publications are posted at:
http://taxforms.web.irs.gov/draft_products.html
Comments: Please email, fax, call, or mail any comments by July 13, 2007.
Gregg M. Lynam
Tax Forms and Publications
SE:W:CAR:MP:T:I:S

Email: [email protected]
Phone: 202- 622- 4056
Fax: 202- 622- 5022

Major Changes to the 2007 Instructions for Form 8606
•

A What’s New item, Modified AGI limit for Roth IRA contributions
increased, was added. The modified AGI limit for Roth IRA contributions is
adjusted for inflation. P.L. 109-280, section 833(c); IRC 408A(c)(3);
219(g)(8)27.

•

A What’s New item, Qualified health savings account (HSA) funding
distribution, was added. A one-time distribution from an IRA can be made
to fund an HSA. P.L. 109-432, section 307; IRC 408(d)(9).

•

A What’s New item, Catch-up contributions in certain employer
bankruptcies, was added. P.L. 109-280, section 831; IRC 219(b)(5)(C).

•

References to qualified hurricane distributions were removed because
they cannot be made after 12/31/2006. IRC 1400Q.

•

Under Who Must File, HSA funding distributions were added to the list in
the second bullet of distributions that are not included for this purpose.
P.L. 109-432, section 307; IRC 408(d)(9).

•

Under Overall Contribution Limit for Traditional and Roth IRAs, a
discussion of Catch-up contributions in certain employer bankruptcies,
was added. A similar note was added at the bottom of the Maximum Roth
IRA Contribution Worksheet. P.L. 109-280, section 831; IRC 219(b)(5)(C).

•

Year references were updated as appropriate.

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Instructions for Form 8606

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2007

Department of the Treasury
Internal Revenue Service

Instructions for Form 8606
Nondeductible IRAs
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
What’s New
Modified AGI limit for Roth IRA
contributions increased. You can
contribute to a Roth IRA for 2007 only if
your 2007 modified adjusted gross
income (AGI) for Roth IRA purposes is
less than:
• $166,000 if married filing jointly or
qualifying widow(er),
• $114,000 if single, head of
household, or married filing separately
and you did not live with your spouse at
any time in 2007, or
• $10,000 if married filing separately
and you lived with your spouse at any
time in 2007.
See Roth IRAs that begins on page 2.
Qualified health savings account
(HSA) funding distribution. If you
are covered by a high deductible health
plan (HDHP), you may be able to make
a nontaxable HSA funding distribution
from your IRA (other than a SEP or
SIMPLE IRA) that would otherwise be
included in income. The distribution
must be a direct trustee-to-trustee
transfer to an HSA. The distribution will
be nontaxable to the extent it is not
more than the limit on your annual HSA
contributions. For more information
about HSAs, see Publication 969,
Health Savings Accounts and Other
Tax-Favored Health Plans.
Catch-up contributions in certain
employer bankruptcies. If you
participated in a 401(k) plan and the
employer who maintained the plan filed
for bankruptcy in an earlier year, you
may be able to contribute up to $7,000
to your traditional or Roth IRA. See
Pub. 590, Individual Retirement
Arrangements (IRAs) for more details.

Purpose of Form
Use Form 8606 to report:
• Nondeductible contributions you
made to traditional IRAs,
• Distributions from traditional, SEP, or
SIMPLE IRAs, if you have ever made
nondeductible contributions to
traditional IRAs,
• Distributions from Roth IRAs, and
• Conversions from traditional, SEP, or
SIMPLE IRAs to Roth IRAs.

Additional information. See Pub.
590, for more details.
If you received distributions from

TIP a traditional, SEP, or SIMPLE
IRA in 2007 and you have never
made nondeductible contributions to
traditional IRAs, do not report the
distributions on Form 8606. Instead,
see the instructions for Form 1040,
lines 15a and 15b; Form 1040A, lines
11a and 11b; or Form 1040NR, lines
16a and 16b. Also, to find out if any of
your contributions to traditional IRAs
are deductible, see the instructions for
Form 1040, line 32; Form 1040A, line
17; or Form 1040NR, line 31.

Who Must File
File Form 8606 if any of the following
apply.
• You made nondeductible
contributions to a traditional IRA for
2007, including a repayment of a
reservist distribution.
• You received distributions from a
traditional, SEP, or SIMPLE IRA in
2007 and your basis in traditional IRAs
is more than zero. For this purpose, a
distribution does not include a rollover,
qualified charitable distribution, a
one-time distribution to fund an HSA,
conversion, recharacterization, or return
of certain contributions.
• You converted an amount from a
traditional, SEP, or SIMPLE IRA to a
Roth IRA in 2007 (unless you
recharacterized the entire conversion —
see page 3).
• You received distributions from a
Roth IRA in 2007 (other than a rollover,
recharacterization, or return of certain
contributions — see page 7).
• You made a repayment of a qualified
hurricane distribution that is attributable
to previously nondeductible
contributions.
Note. If you recharacterized a 2007
Roth IRA contribution as a traditional
IRA contribution, or vice versa, treat the
contribution as having been made to
the second IRA, not the first IRA. See
page 3.
You do not have to file Form

TIP 8606 solely to report regular
contributions to Roth IRAs. But
see What Records Must I Keep? on
page 5.
Cat. No. 25399E

When and Where To File
File Form 8606 with your 2007 Form
1040, 1040A, or 1040NR. If you are not
required to file an income tax return but
are required to file Form 8606, sign
Form 8606 and send it to the Internal
Revenue Service at the same time and
place you would otherwise file Form
1040, 1040A, or 1040NR.

Definitions
Deemed IRAs
A qualified employer plan (retirement
plan) can maintain a separate account
or annuity under the plan (a deemed
IRA) to receive voluntary employee
contributions. If in 2007 you had a
deemed IRA, use the rules for either a
traditional IRA or a Roth IRA depending
on which type it was. See Pub. 590 for
more details.

Traditional IRAs
For purposes of Form 8606, a
traditional IRA is an individual
retirement account or an individual
retirement annuity other than a SEP,
SIMPLE, or Roth IRA.
Contributions. An overall contribution
limit applies to traditional IRAs and
Roth IRAs. See Overall Contribution
Limit for Traditional and Roth IRAs that
begins on page 2. Contributions to a
traditional IRA may be fully deductible,
partially deductible, or completely
nondeductible.
Basis. Your basis in traditional IRAs is
the total of all your nondeductible
contributions to traditional IRAs minus
the total of all your nontaxable
distributions, adjusted if necessary (see
the instructions for line 2 on page 5).
Keep track of your basis to figure the
nontaxable part of your future
distributions.

SEP IRAs
A simplified employee pension (SEP) is
an employer-sponsored plan under
which an employer can make
contributions to traditional IRAs for its
employees. If you make contributions to
that IRA (excluding employer
contributions you make if you are
self-employed), they are treated as
contributions to a traditional IRA and
may be deductible or nondeductible.
SEP IRA distributions are reported in

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Instructions for Form 8606

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the same manner as traditional IRA
distributions.

SIMPLE IRAs
Your participation in your employer’s
SIMPLE IRA plan does not prevent you
from making contributions to a
traditional, SEP, or Roth IRA.

Roth IRAs
A Roth IRA is similar to a traditional
IRA, but has the following features.
• Contributions are never deductible.
• Contributions can be made after the
owner reaches age 701/2.
• No minimum distributions are
required during the Roth IRA owner’s
lifetime.
• Qualified distributions are not
includible in income.
Qualified distribution. Generally, a
qualified distribution is any distribution
made:

•
•
•
•

On or after age 591/2,
Upon death,
Due to disability, or
For qualified first-time homebuyer
expenses.
Exception. Any distribution made
during the 5-year period beginning with
the first year for which you made a
Roth IRA contribution or conversion is
not a qualified distribution, and may be
taxable.

Contributions. You can contribute to
a Roth IRA for 2007 only if your 2007
modified adjusted gross income (AGI)
for Roth IRA purposes is less than:
• $10,000 if married filing separately
and you lived with your spouse at any
time in 2007,
• $166,000 if married filing jointly or
qualifying widow(er), or
• $114,000 if single, head of
household, or if married filing
separately and you did not live with
your spouse at any time in 2007.
Use the Maximum Roth IRA
Contribution Worksheet below to figure
the maximum amount you can
contribute to a Roth IRA for 2007. If you
are married filing jointly, complete the
worksheet separately for you and your
spouse.

!

If you contributed too much, see
Recharacterizations on page 3.

CAUTION

Modified AGI for Roth IRA purposes.
First, figure your AGI (Form 1040, line
38; Form 1040A, line 22; or Form
1040NR, line 36). Then, refigure it by:
1. Subtracting the following.
a. Roth IRA conversions included
on Form 1040, line 15b; Form 1040A,
line 11b; or Form 1040NR, line 16b.
b. Minimum required distributions
from IRAs (for conversions only).
2. Adding the following.

Maximum Roth IRA Contribution Worksheet (keep for your records)
Caution: If married filing jointly and the combined taxable compensation (defined on this
page) for you and your spouse is less than $8,000 ($9,000 if one spouse is 50 or older at
the end of 2007; $10,000 if both spouses are 50 or older at the end of 2007), do not use
this worksheet. Also, do not use this worksheet if you or your spouse qualify for the
catch-up contribution for certain employer bankruptcies. Instead, see Pub. 590 for special
rules.
1 If married filing jointly, enter $4,000 ($5,000 if age 50 or older at
the end of 2007). All others, enter the smaller of $4,000
($5,000 if age 50 or older at the end of 2007) or your taxable
compensation (defined on this page) . . . . . . . . . . . . . . . . . .
2 Enter your total contributions to traditional IRAs for 2007 . . . . .
3 Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . .
4 Enter: $166,000 if married filing jointly or qualifying widow(er);
$10,000 if married filing separately and you lived with your
spouse at any time in 2007. All others, enter $114,000 . . . . . .
5 Enter your modified AGI for Roth IRA purposes (see this page)
6 Subtract line 5 from line 4. If zero or less, stop here; you may
not contribute to a Roth IRA for 2007. See
Recharacterizations on page 3 if you made Roth IRA
contributions for 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 If line 4 above is $114,000, enter $15,000; otherwise, enter
$10,000. If line 6 is more than or equal to line 7, skip lines 8 and
9 and enter the amount from line 3 on line 10 . . . . . . . . . . . .
8 Divide line 6 by line 7 and enter the result as a decimal
(rounded to at least 3 places). If the result is 1.000 or more,
enter 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 Multiply line 1 by line 8. If the result is not a multiple of $10,
increase it to the next multiple of $10 (for example, increase
$490.30 to $500). Enter the result, but not less than $200 . . . .
10 Maximum 2007 Roth IRA Contribution. Enter the smaller of
line 3 or line 9. See Recharacterizations on page 3 if you
contributed more than this amount to Roth IRAs for 2007 . . . .

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1
2
3

4
5

6

7

8

9

10

a. IRA deduction from Form 1040,
line 32; Form 1040A, line 17; or Form
1040NR, line 31.
b. Student loan interest deduction
from Form 1040, line 33; Form 1040A,
line 18; or Form 1040NR, line 32.
c. Tuition and fees deduction from
Form 1040, line 34, or Form 1040A,
line 19.
d. Domestic production activities
deduction from Form 1040, line 35, or
Form 1040NR, line 33.
e. Exclusion of interest from Form
8815, Exclusion of Interest From Series
EE and I U.S. Savings Bonds Issued
After 1989.
f. Exclusion of employer-provided
adoption benefits from Form 8839,
Qualified Adoption Expenses.
g. Foreign earned income exclusion
from Form 2555, Foreign Earned
Income, or Form 2555-EZ, Foreign
Earned Income Exclusion.
h. Foreign housing exclusion or
deduction from Form 2555.
When figuring modified AGI for
Roth IRA purposes, you may
CAUTION have to refigure items based on
modified AGI, such as taxable social
security benefits and passive activity
losses allowed under the special
allowance for rental real estate
activities. See Can You Contribute to a
Roth IRA? in Pub. 590 for details.

!

Distributions. See the instructions for
Part III that begin on page 6.

Overall Contribution Limit for
Traditional and Roth IRAs
If you are not married filing jointly, your
limit on contributions to traditional and
Roth IRAs is the smaller of $4,000
($5,000 if age 50 or older at the end of
2007) or your taxable compensation
(see below). If you are married filing
jointly, your contribution limit is
generally $4,000 ($5,000 if age 50 or
older at the end of 2007) and your
spouse’s contribution limit is $4,000
($5,000 if age 50 or older at the end of
2007) as well. But if the combined
taxable compensation of both you and
your spouse is less than $8,000
($9,000 if one spouse is 50 or older at
the end of 2007; $10,000 if both
spouses are 50 or older at the end of
2007), see Pub. 590 for special rules.
This limit does not apply to employer
contributions to a SEP or SIMPLE IRA.
Catch-up contributions in certain
employer bankruptcies. If you
participated in a 401(k) plan and the
employer who maintained the plan filed
for bankruptcy in an earlier year, you
may be able to contribute up to $7,000
to your traditional or Roth IRA. For
more information, see Catch-up
contributions in certain employer
bankruptcies in Pub. 590.

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Note. Rollovers, Roth IRA
conversions, and repayments of
qualified hurricane and reservists
distributions do not affect your
contribution limit.
The amount you can contribute
to a Roth IRA may also be
CAUTION limited by your modified AGI
(see Contributions and the Maximum
Roth IRA Contribution Worksheet on
page 2).
Taxable compensation includes the
following.
• Wages, salaries, tips, etc. If you
received a distribution from a
nonqualified deferred compensation
plan or nongovernmental section 457
plan that is included in Form W-2, box
1, or in Form 1099-MISC, box 7, do not
include that distribution in taxable
compensation. The distribution should
be shown in (a) Form W-2, box 11, (b)
Form W-2, box 12, with code Z, or (c)
Form 1099-MISC, box 15b. If it is not,
contact your employer for the amount
of the distribution.
• Nontaxable combat pay if you were a
member of the U.S. Armed Forces.
• Self-employment income. If you are
self-employed (a sole proprietor or a
partner), taxable compensation is your
net earnings from your trade or
business (provided your personal
services are a material
income-producing factor) reduced by
your deduction for contributions made
on your behalf to retirement plans and
the deduction allowed for one-half of
your self-employment tax.
• Alimony and separate maintenance.
See Pub. 590 for details.

!

Recharacterizations
Generally, you can recharacterize
(correct) an IRA contribution or Roth
IRA conversion by making a
trustee-to-trustee transfer from one IRA
to another type of IRA.
Trustee-to-trustee transfers are made
directly between financial institutions or
within the same financial institution.
You generally must make the transfer
by the due date of your return
(including extensions) and reflect it on
your return. However, if you timely filed
your return without making the transfer,
you can make the transfer within 6
months of the due date of your return,
excluding extensions. If necessary, file
an amended return reflecting the
transfer (see page 5). Write “Filed
pursuant to section 301.9100-2” on the
amended return.
Reporting recharacterizations. Any
recharacterized conversion will be
treated as though the conversion had
not occurred. Any recharacterized
contribution will be treated as having
been originally contributed to the
second IRA, not the first IRA. The

amount transferred must include related
earnings or be reduced by any loss. In
most cases, the related earnings that
you must transfer are figured by your
IRA trustee or custodian. If you need to
figure the related earnings, see How Do
You Recharacterize a Contribution in
Pub. 590. Any earnings or loss that
occurred in the first IRA will be treated
as having occurred in the second IRA.
You cannot deduct any loss that
occurred while the funds were in the
first IRA. Also, you cannot take a
deduction for a contribution to a
traditional IRA if the amount is later
recharacterized. See below for how to
report the three different types of
recharacterizations, including the
statement that must be attached to your
return explaining the recharacterization.
1. You converted an amount from a
traditional, SEP, or SIMPLE IRA to a
Roth IRA in 2007 and later
recharacterized all or part of the
amount back to a traditional, SEP, or
SIMPLE IRA. If you only
recharacterized part of the amount
converted, report the amount not
recharacterized on Form 8606. If you
recharacterized the entire amount, do
not report the recharacterization on
Form 8606. In either case, attach a
statement to your return explaining the
recharacterization and include the
amount converted from the traditional,
SEP, or SIMPLE IRA in the total on
Form 1040, line 15a; Form 1040A, line
11a; or Form 1040NR, line 16a. If the
recharacterization occurred in 2007,
also include the amount transferred
back from the Roth IRA on that line. If
the recharacterization occurred in 2008,
report the amount transferred only in
the attached statement, and not on
your 2007 or 2008 tax return (a 2008
Form 1099-R should be sent to you by
January 31, 2009, stating that you
made a recharacterization of an amount
converted in the prior year).
Example. You are married filing
jointly and converted $20,000 from your
traditional IRA to a new Roth IRA on
May 20, 2007. On April 7, 2008, you
determine that your 2007 modified AGI
for Roth IRA purposes will exceed
$100,000, and you are not allowed to
make a Roth IRA conversion. The value
of the Roth IRA on that date is $19,000.
You recharacterize the conversion by
transferring that entire amount to a
traditional IRA in a trustee-to-trustee
transfer. You report $20,000 on Form
1040, line 15a. You do not include the
$19,000 on line 15a because it did not
occur in 2007 (you also do not report
that amount on your 2008 return
because it does not apply to the 2008
tax year). You attach a statement to
Form 1040 explaining that (a) you
made a conversion of $20,000 from a
traditional IRA on May 20, 2007, (b)

-3-

you recharacterized the entire amount,
which was then valued at $19,000,
back to a traditional IRA on April 7,
2008, and (c) you recharacterized
because your 2007 modified AGI for
Roth IRA purposes exceeded
$100,000.
2. You made a contribution to a
traditional IRA and later recharacterized
part or all of it to a Roth IRA. If you
recharacterized only part of the
contribution, report the nondeductible
traditional IRA portion of the remaining
contribution, if any, on Form 8606, Part
I. If you recharacterized the entire
contribution, do not report the
contribution on Form 8606. In either
case, attach a statement to your return
explaining the recharacterization. If the
recharacterization occurred in 2007,
include the amount transferred from the
traditional IRA on Form 1040, line 15a;
Form 1040A, line 11a; or Form
1040NR, line 16a. If the
recharacterization occurred in 2008,
report the amount transferred only in
the attached statement.
Example. You are single, covered
by a retirement plan, and you
contributed $4,000 to a new traditional
IRA on May 27, 2007. On February 24,
2008, you determine that your 2007
modified AGI will limit your traditional
IRA deduction to $1,000. The value of
your traditional IRA on that date is
$4,400. You decide to recharacterize
$3,000 of the traditional IRA
contribution as a Roth IRA contribution,
and have $3,300 ($3,000 contribution
plus $300 related earnings) transferred
from your traditional IRA to a Roth IRA
in a trustee-to-trustee transfer. You
deduct the $1,000 traditional IRA
contribution on Form 1040. You are not
required to file Form 8606, but you
must attach a statement to your return
explaining the recharacterization. The
statement indicates that you contributed
$4,000 to a traditional IRA on May 27,
2007; recharacterized $3,000 of that
contribution on February 24, 2008, by
transferring $3,000 plus $300 of related
earnings from your traditional IRA to a
Roth IRA in a trustee-to-trustee
transfer; and that all $1,000 of the
remaining traditional IRA contribution is
deducted on Form 1040. You do not
report the $3,300 distribution from your
traditional IRA on your 2007 Form 1040
because the distribution occurred in
2008. You do not report the distribution
on your 2008 Form 1040 because the
recharacterization related to 2007 and
was explained in an attachment to your
2007 return.
3. You made a contribution to a
Roth IRA and later recharacterized part
or all of it to a traditional IRA. Report
the nondeductible traditional IRA
portion, if any, on Form 8606, Part I. If
you did not recharacterize the entire

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contribution, do not report the
remaining Roth IRA portion of the
contribution on Form 8606. Attach a
statement to your return explaining the
recharacterization. If the
recharacterization occurred in 2007,
include the amount transferred from the
Roth IRA on Form 1040, line 15a; Form
1040A, line 11a; or Form 1040NR, line
16a. If the recharacterization occurred
in 2008, report the amount transferred
only in the attached statement, and not
on your 2007 or 2008 tax return.
Example. You are single and
contributed $4,000 to a new Roth IRA
on June 14, 2007. On December 27,
2007, you determine that your 2007
modified AGI will allow a full traditional
IRA deduction. You decide to
recharacterize the Roth IRA
contribution as a traditional IRA
contribution and have $4,200, the
balance in the Roth IRA account
($4,000 contribution plus $200 related
earnings), transferred from your Roth
IRA to a traditional IRA in a
trustee-to-trustee transfer. You deduct
the $4,000 traditional IRA contribution
on Form 1040. You are not required to
file Form 8606, but you must attach a
statement to your return explaining the
recharacterization. The statement
indicates that you contributed $4,000 to
a new Roth IRA on June 14, 2007;
recharacterized that contribution on
December 27, 2007, by transferring
$4,200, the balance in the Roth IRA, to
a traditional IRA in a trustee-to-trustee
transfer; and that $4,000 of the
traditional IRA contribution is deducted
on Form 1040. You include the $4,200
distribution on your 2007 Form 1040,
line 15a.

Return of IRA
Contributions
If, in 2007, you made traditional IRA
contributions or Roth IRA contributions
for 2007 and you had those
contributions returned to you with any
related earnings (or less any loss) by
the due date (including extensions) of
your 2007 tax return, the returned
contributions are treated as if they were
never contributed. Do not report the
contribution or distribution on Form
8606 or take a deduction for the
contribution. However, you must report
the distribution and any related
earnings on your 2007 Form 1040,
lines 15a and 15b; Form 1040A, lines
11a and 11b; or Form 1040NR, lines
16a and 16b. Attach a statement
explaining the distribution. You cannot
deduct any loss that occurred (see Pub.
590 for an exception if you withdrew the
entire amount in all your traditional or
Roth IRAs). Also, if you were under age
591/2 at the time of a distribution with
related earnings, you generally are

subject to the additional 10% tax on
early distributions (see Form 5329,
Additional Taxes on Qualified Plans
(Including IRAs) and Other
Tax-Favored Accounts).
If you timely filed your 2007 tax
return without withdrawing a
contribution that you made in 2007, you
can still have the contribution returned
to you within 6 months of the due date
of your 2007 tax return, excluding
extensions. If you do, file an amended
return with “Filed pursuant to section
301.9100-2” written at the top. Report
any related earnings on the amended
return and include an explanation of the
withdrawal. Make any other necessary
changes on the amended return (for
example, if you reported the
contributions as excess contributions
on your original return, include an
amended Form 5329 reflecting that the
withdrawn contributions are no longer
treated as having been contributed).
In most cases, the related earnings
that you must withdraw are figured by
your IRA trustee or custodian. If you
need to figure the related earnings on
IRA contributions that were returned to
you, see Contributions Returned Before
Due Date of Return in Pub. 590. If you
made a contribution or distribution while
the IRA held the returned contribution,
see Pub. 590.
If you made a contribution for 2006
and you had it returned to you in 2007
as described above, do not report the
distribution on your 2007 tax return.
Instead, report it on your 2006 original
or amended return in the manner
described above.
Example. On May 31, 2007, you
contributed $4,000 to your traditional
IRA. The value of the IRA was $18,000
prior to the contribution. On December
29, 2007, when you are age 57 and the
value of the IRA is $23,600, you realize
you cannot make the entire contribution
because your taxable compensation for
the year will be only $3,000. You
decide to have $1,000 of the
contribution returned to you and
withdraw $1,076 from your IRA ($1,000
contribution plus $76 earnings). You did
not make any other withdrawals or
contributions. You are not required to
file Form 8606. You deduct the $3,000
remaining contribution on Form 1040.
You include $1,076 on Form 1040, line
15a, and $76 on line 15b. You attach a
statement to your tax return explaining
the distribution. Because you properly
removed the excess contribution with
the related earnings by the due date of
your tax return, you are not subject to
the additional 6% tax on excess
contributions. However, because you
were under age 591/2 at the time of the
distribution, the $76 of earnings is
subject to the additional 10% tax on

-4-

early distributions. You include $7.60
on Form 1040, line 60.

Return of Excess
Traditional IRA
Contributions
The return (distribution) in 2007 of
excess traditional IRA contributions for
years prior to 2007 is not taxable if all
three of the following apply.
1. The distribution was made after
the due date, including extensions, of
your tax return for the year for which
the contribution was made (if the
distribution was made earlier, see
Return of IRA Contributions on this
page).
2. The total contributions (excluding
rollovers and conversions) to your
traditional and SEP IRAs for the year
for which the excess contribution was
made did not exceed:
a. $4,000 ($5,000 if age 50 or older
at the end of the year) for 2006,
b. $4,000 ($4,500 if age 50 or older
at the end of the year) for 2005,
c. $3,000 ($3,500 if age 50 or older
at the end of the year) for years after
2001 and before 2005,
d. $2,000 for years after 1996 and
before 2002, or
e. $2,250 for years before 1997.
If your total IRA contributions for the
year included employer contributions to
a SEP IRA, increase the $4,000
($5,000 or $4,500, if applicable),
$3,000 ($3,500, if applicable), $2,000,
or $2,250 by the smaller of the
employer contributions or $44,000
($42,000 for 2005, $41,000 for 2004,
$40,000 for 2003 and 2002, $35,000 for
2001, or $30,000 for years before
2001).
3. No deduction was allowable
(without regard to the modified AGI
limitation) or taken for the excess
contributions.
Include the total amount distributed
on Form 1040, line 15a; Form 1040A,
line 11a; or Form 1040NR, line 16a;
and attach a statement to your return
explaining the distribution. See the
example below.
If you meet these conditions and are
otherwise required to file Form 8606:
• Do not take into account the amount
of the withdrawn contributions in
figuring line 2, and
• Do not include the amount of the
withdrawn contributions on line 7.
Example. You are single, you
retired in 2004, and you had no taxable
compensation after 2004. However, you
made traditional IRA contributions (that
you did not deduct) of $3,000 in 2005
and $4,000 in 2006. In November 2007,
a tax practitioner informed you that you
had made excess contributions for

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those years because you had no
taxable compensation. You withdrew
the $7,000 and filed amended returns
for 2005 and 2006 reflecting the
additional 6% tax on excess
contributions on Form 5329. You
include the $7,000 distribution on your
2007 Form 1040, line 15a, enter -0- on
line 15b, and attach a statement to your
return explaining the distribution,
including the fact that you filed
amended returns for 2005 and 2006
and paid the additional 6% tax on the
excess contributions for those years.
The statement indicates that the
distribution is not taxable because (a) it
was made after the due dates of your
2005 and 2006 tax returns, including
extensions, (b) your total IRA
contributions did not exceed $4,000
($4,500 if age 50 or older at the end of
2005) for 2005 or $4,000 ($5,000 if age
50 or older at the end of 2006) for
2006, and (c) you did not take a
deduction for the contributions, and no
deduction was allowable because you
did not have any taxable compensation
for those years. The statement also
indicates that the distribution reduced
your excess contributions to -0-, as
reflected on your 2007 Form 5329 and
it indicates your adjusted basis in
nondeductible contributions.

Amending Form 8606
After you file your return, you can
change a nondeductible contribution to
a traditional IRA to a deductible
contribution or vice versa. You also
may be able to make a
recharacterization (see page 3). If
necessary, complete a new Form 8606
showing the revised information and file
it with Form 1040X, Amended U.S.
Individual Income Tax Return.

Penalty for Not Filing
If you are required to file Form 8606 to
report a nondeductible contribution to a
traditional IRA for 2007, but do not do
so, you must pay a $50 penalty, unless
you can show reasonable cause.

Overstatement Penalty
If you overstate your nondeductible
contributions, you must pay a $100
penalty, unless you can show
reasonable cause.

What Records Must I
Keep?
To verify the nontaxable part of
distributions from your IRAs, including
Roth IRAs, keep a copy of the following
forms and records until all distributions
are made.
• Page 1 of Forms 1040 (or Forms
1040A, 1040NR, or 1040-T) filed for
each year you made a nondeductible
contribution to a traditional IRA.

• Forms 8606 and any supporting
statements, attachments, and
worksheets for all applicable years.
• Forms 5498 or similar statements
you received each year showing
contributions you made to a traditional
IRA or Roth IRA.
• Forms 5498 or similar statements
you received showing the value of your
traditional IRAs for each year you
received a distribution.
• Forms 1099-R or W-2P you received
for each year you received a
distribution.
Note. Forms 1040-T and W-2P are
forms that were used in prior years.

Specific Instructions
Name and social security number
(SSN). If you file a joint return, enter
only the name and SSN of the spouse
whose information is being reported on
Form 8606. If both you and your
spouse are required to file Form 8606,
file a separate Form 8606 for each of
you.

Part I—Nondeductible
Contributions to
Traditional IRAs and
Distributions From
Traditional, SEP, and
SIMPLE IRAs
Line 1
If you used the IRA Deduction
Worksheet in the Form 1040 or 1040A
instructions, subtract line 12 (line 10 for
Form 1040A) of the worksheet (or the
amount you chose to deduct on Form
1040, line 32, or Form 1040A, line 17, if
less) from the smaller of line 10 or line
11 (line 8 or line 9 for Form 1040A) of
the worksheet. Enter the result on line 1
of Form 8606. You cannot deduct the
amount included on line 1.
If you used the worksheet Figuring
Your Reduced IRA Deduction for 2007
in Pub. 590, enter on line 1 of Form
8606 any nondeductible contributions
from the appropriate lines of that
worksheet.
If you did not have any deductible
contributions, you can make
nondeductible contributions up to your
contribution limit. Enter on line 1 of
Form 8606 your nondeductible
contributions.
Include on line 1 any repayment of a
qualified reservist distribution. Also,
include any repayment of a qualified
hurricane distribution that is attributable
to previously nondeductible
contributions.

-5-

Do not include on line 1 contributions
that you had returned to you with the
related earnings (or less any loss). See
page 4.

Line 2
If this is the first year you are required
to file Form 8606, enter -0-. Otherwise,
use the chart in the next column to find
the amount to enter on line 2.
However, you may need to enter an
amount other than -0- or adjust the
amount from the chart if your basis
changed because of any of the
following.
• You had a return of excess traditional
IRA contributions (see page 4).
• Incident to divorce, you transferred or
received part or all of a traditional IRA
(see the last bulleted item under Line 7
on page 3).
• You rolled over any nontaxable
portion of your qualified employer plan
to a traditional or SEP IRA. Include the
nontaxable portion on
line 2.
IF the last Form
THEN enter on line
8606 you filed was 2...
for...
2006, 2005, 2004,
The amount from
2003, 2002, or 2001 line 14 of that Form
8606
A year after 1992
and before 2001

The amount from
line 12 of that Form
8606

A year after 1988
and before 1993

The amount from
line 14 of that Form
8606

1988

The total of the
amounts on lines 7
and 16 of that Form
8606

1987

The total of the
amounts on lines 4
and 13 of that Form
8606

Line 4
If you made contributions to traditional
IRAs for 2007 in 2007 and 2008 and
you have both deductible and
nondeductible contributions, you can
choose to treat the contributions made
in 2007 first as nondeductible
contributions and then as deductible
contributions, or vice versa. But the
amount on line 4 cannot be less than
the excess, if any, of the amount on line
1 over the contributions you actually
made in 2007.
Example. You made contributions
for 2007 of $2,000 in May 2007 and
$2,000 in January 2008, of which
$3,000 are deductible and $1,000 are
nondeductible. You choose $1,000 of
your contribution in 2007 to be
nondeductible. You enter the $1,000 on

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line 1, but not line 4, and it becomes
part of your basis for 2007.
Although the contributions to
traditional IRAs for 2007 that you made
from January 1, 2008, through April 15,
2008, can be treated as nondeductible,
they are not included in figuring the
nontaxable part of any distributions you
received in 2007.

Line 6
Enter the total value of all your
traditional, SEP, and SIMPLE IRAs as
of December 31, 2007, plus any
outstanding rollovers. A statement
should be sent to you by January 31,
2008, showing the value of each IRA
on December 31, 2007. However, if you
recharacterized any amounts, enter on
line 6 the total value taking into account
all recharacterizations, including
recharacterizations made after
December 31, 2007.
For line 6, a rollover is a tax-free
distribution from one traditional, SEP, or
SIMPLE IRA that is contributed to
another traditional, SEP, or SIMPLE
IRA. The rollover must be completed
within 60 days of receiving the
distribution from the first IRA. An
outstanding rollover is any amount
distributed after November 1, 2007, that
was rolled over in 2008, but within the
60-day rollover period.
The IRS may waive the 60-day
requirement if failing to waive it would
be against equity or good conscience,
such as situations where a casualty,
disaster, or other events beyond your
reasonable control prevented you from
meeting the 60-day requirement. Also,
the 60-day period may be extended if
you had a frozen deposit. See Pub. 590
for details.
Note. Do not include a rollover from a
traditional or SEP IRA to a qualified
employer plan even if it was an
outstanding rollover.

Line 7
If you received a distribution in
2007 from a traditional, SEP, or
CAUTION SIMPLE IRA, and you also
made contributions for 2007 to a
traditional IRA that may not be fully
deductible because of the income
limits, you must make a special
computation before completing the rest
of this form. For details, including how
to complete Form 8606, see Are
Distributions Taxable? in Chapter 1 of
Pub. 590.
Do not include any of the following
on line 7.
• Distributions that you converted to a
Roth IRA.
• Recharacterizations.
• Distributions that you rolled over by
December 31, 2007, and any

!

outstanding rollovers included on
line 6.
• Distributions you rolled over to a
qualified employer plan.
• A one-time distribution to fund an
HSA. For details, see Form 8889 and
its instructions.
• Qualified charitable distributions. For
details, see the instructions for Form
1040, lines 15a and 15b; Form 1040A,
lines 11a and 11b; or Form 1040NR,
lines 16a and 16b.
• Distributions that are treated as a
return of contributions under Return of
IRA Contributions on page 4.
• Distributions that are treated as a
return of excess contributions under
Return of Excess Traditional IRA
Contributions on page 4.
• Distributions of excess contributions
due to incorrect rollover information. If
an excess contribution in your
traditional IRA is the result of a rollover
from a qualified retirement plan and the
excess occurred because the
information the plan was required to
give you was incorrect, the distribution
of the excess contribution is not
taxable. Attach a statement to your
return explaining the distribution and
include the amount of the distribution
on Form 1040, line 15a; Form 1040A,
line 11a; or Form 1040NR, line 16a.
See Pub. 590 for more details.
• Distributions that are incident to
divorce. The transfer of part or all of
your traditional, SEP, or SIMPLE IRA to
your spouse under a divorce or
separation agreement is not taxable to
you or your spouse. If this transfer
results in a change in the basis of the
traditional IRA of either spouse, both
spouses must file Form 8606 and show
the increase or decrease in the amount
of basis on line 2. Attach a statement
explaining this adjustment. Include in
the statement the character of the
amounts in the traditional IRA, such as
the amount attributable to
nondeductible contributions. Also,
include the name and social security
number of the other spouse.

Line 8
If, in 2007, you converted any amounts
from traditional, SEP, or SIMPLE IRAs
to a Roth IRA, enter on line 8 the net
amount you converted. To figure that
amount, subtract from the total amount
converted in 2007 any portion that you
recharacterized back to traditional,
SEP, or SIMPLE IRAs in 2007 or 2008
(see Recharacterizations that begins on
page 3). Do not take into account
related earnings that were transferred
with the recharacterized amount or any
loss that occurred while the amount
was in the Roth IRA. See item 1 under
Reporting recharacterizations on page
3 for details.

-6-

Line 15
If you were under age 591/2 at the time
you received distributions from your
traditional, SEP, or SIMPLE IRA, there
generally is an additional 10% tax on
the portion of the distribution that is
included in income (25% for a
distribution from a SIMPLE IRA during
the first 2 years). See the Instructions
for Form 1040, line 60, or the
Instructions for Form 1040NR, line 55.

Part II—2007
Conversions From
Traditional, SEP, or
SIMPLE IRAs to Roth
IRAs
Complete Part II if you converted part
or all of your traditional, SEP, or
SIMPLE IRAs to a Roth IRA in 2007,
excluding any portion you
recharacterized. See item 1 under
Reporting recharacterizations on page
3 for details.
Limit on number of conversions. If
you converted an amount from a
traditional, SEP, or SIMPLE IRA to a
Roth IRA in 2007 and then
recharacterized the amount back to a
traditional, SEP, or SIMPLE IRA, you
cannot reconvert that amount until the
later of January 1, 2008, or 30 days
after the recharacterization. See Pub.
590 for details.
You cannot convert any amount
to Roth IRAs in 2007 if (a) your
CAUTION modified AGI for Roth IRA
purposes (see page 2) is more than
$100,000, or (b) your filing status is
married filing separately and you lived
with your spouse at any time in 2007. If
you erroneously made a conversion,
you must recharacterize the converted
amount. See Recharacterizations that
begins on page 3.

!

Line 16
If you did not complete line 8, see the
instructions for that line. Then, enter on
line 16 the amount you would have
entered on line 8 had you completed it.

Line 17
If you did not complete line 11, enter on
line 17 the amount from line 2 (or the
amount you would have entered on line
2 if you had completed that line) plus
any contributions included on line 1 that
you made before the conversion.

Part III—Distributions
From Roth IRAs
Complete Part III to figure the taxable
part, if any, of your 2007 Roth IRA
distributions.

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Basis in Regular Roth IRA Contributions — Line 22
IF the most recent year
prior to 2007 in which you
took a Roth IRA
distribution* was...

THEN enter on Form 8606, PLUS the total of all your
line 22, this amount...
regular contributions** to
Roth IRAs for...

2006
The excess of your 2006
(you had an amount on your Form 8606, line 22, over line
Form 8606, line 19)
19 of that Form 8606.

2007

2005
The excess of your 2005
(you had an amount on your Form 8606, line 22, over line
Form 8606, line 19)
19 of that Form 8606.

2006 and 2007

2004
The excess of your 2004
(you had an amount on your Form 8606, line 22, over line
Form 8606, line 19)
19 of that Form 8606.

2005 through 2007

2003
The excess of your 2003
(you had an amount on your Form 8606, line 20, over line
2003 Form 8606, line 19)
19 of that Form 8606.

2004 through 2007

2002
The excess of your 2002
(you had an amount on your Form 8606, line 20, over line
2002 Form 8606, line 19)
19 of that Form 8606.

2003 through 2007

2001
The excess of your 2001
(you had an amount on your Form 8606, line 20, over line
2001 Form 8606, line 19)
19 of that Form 8606.

2002 through 2007

2000
(you had an amount on your
2000 Form 8606,
line 17)

The excess of your 2000
Form 8606, line 18d, over
line 17 of that Form 8606.

2001 through 2007

1999
(you had an amount on your
1999 Form 8606,
line 17)

The excess of your 1999
Form 8606, line 18d, over
line 17 of that Form 8606.

2000 through 2007

1998
(you had an amount on your
1998 Form 8606,
line 18)

The excess of your 1998
Form 8606, line 19c, over
line 18 of that Form 8606.

1999 through 2007

Did not take a Roth IRA
distribution* prior to 2007

$0

1998 through 2007

Line 22

*Excluding rollovers, recharacterizations, and contributions that you had returned to you.
**Excluding rollovers, conversions, Roth IRA contributions that were recharacterized, and
any contributions that you had returned to you.

Line 19
Do not include on line 19 any of the
following.
• Distributions that you rolled over,
including distributions made in 2007
and rolled over after December 31,
2007 (outstanding rollovers).
• Recharacterizations.
• Distributions that are a return of
contributions under Return of IRA
Contributions on page 4.
• Distributions made on or after age
591/2 if you made a contribution
(including a conversion) for 2002 or an
earlier year.
• A one-time distribution to fund an
HSA. For details, see Form 8889 and
its instructions.
• Qualified charitable distributions. For
details, see the instructions for Form
1040, lines 15a and 15b; Form 1040A,
lines 11a and 11b; or Form 1040NR,
lines 16a and 16b.

IRA and you made a contribution
(including a conversion) to a Roth IRA
for 2002 or an earlier year, enter the
amount of your qualified expenses on
line 20, but do not enter more than
$10,000.

• Distributions made upon death or

due to disability if you made a
contribution (including a conversion) for
2002 or an earlier year.
• Distributions that are incident to
divorce. The transfer of part or all of
your Roth IRA to your spouse under a
divorce or separation agreement is not
taxable to you or your spouse.
If, after considering the items above,
you do not have an amount to enter on
line 19, do not complete Part III; your
Roth IRA distribution(s) is not taxable.
Instead, include your total Roth IRA
distribution(s) on Form 1040, line 15a;
Form 1040A, line 11a; or Form
1040NR, line 16a.

Line 20
If you had a qualified first-time
homebuyer distribution from your Roth

-7-

Figure the amount to enter on line 22
as follows.
• If you did not take a Roth IRA
distribution before 2007 (other than an
amount rolled over or recharacterized
or a returned contribution), enter on line
22 the total of all your regular
contributions to Roth IRAs for 1998
through 2007 (excluding rollovers from
other Roth IRAs and any contributions
that you had returned to you), adjusted
for any recharacterizations.
• If you did take such a distribution
before 2007, use the chart on this page
to figure the amount to enter.
• Increase the amount on line 22 by
any amount rolled in from a designated
Roth account that is treated as
investment in the contract.
• Increase or decrease the amount on
line 22 by any basis transferred or
received incident to divorce. Also attach
a statement similar to the one
explained in the last bulleted item under
Line 7 on page 6.

Line 23
Generally, there is an additional 10%
tax on 2007 distributions from a Roth
IRA that are shown on line 23. The
additional tax is figured on Form 5329,
Part I. See the instructions for Form
5329, line 1, for details and exceptions.

Line 24
Figure the amount to enter on line 24
as follows.
• If you have never made a Roth IRA
conversion, enter -0- on line 24.
• If you took a Roth IRA distribution
(other than an amount rolled over or
recharacterized or a returned
contribution) before 2007 in excess of
your basis in regular Roth IRA
contributions, use the chart on page 8
to figure the amount to enter on line 24.
• If you did not take such a distribution
before 2007, enter on line 24 the total
of all your conversions to Roth IRAs
(other than amounts recharacterized).
These amounts are shown on line 14c
of your 1998, 1999, and 2000 Forms
8606 and line 16 of your 2001 through
2007 Forms 8606.
• Increase or decrease the amount on
line 24 by any basis transferred or
received incident to divorce. Also attach
a statement similar to the one
explained in the last bulleted item under
Line 7 on page 6.

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Instructions for Form 8606

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Basis in Roth IRA Conversions — Line 24
IF the most recent year
THEN enter on Form 8606, line
prior to 2007 in which you 24, this amount...
had a distribution* in
excess of your basis in
contributions was...

PLUS the sum of the
amounts on the
following lines...

2006
(your 2006 Form 8606, line
22, was less than line 19 of
that Form 8606)

The excess, if any, of your 2006
Form 8606, line 24, over line 23**
of that Form 8606.

Line 16 of your 2007
Form 8606

2005
(your 2005 Form 8606, line
22, was less than line 19 of
that Form 8606)

The excess, if any, of your 2005
Form 8606, line 24, over line 23**
of that Form 8606.

Line 16 of your 2006
and 2007 Forms 8606

2004
(your 2004 Form 8606, line
22, was less than line 19 of
that Form 8606)

The excess, if any, of your 2004
Form 8606, line 24, over line 23**
of that Form 8606.

Line 16 of your 2005
through 2007 Forms
8606

2003
The excess, if any, of your 2003
(you had an amount on your Form 8606, line 22, over line 21 of
2003 Form 8606, line 21)
that Form 8606.

Line 16 of your 2004
through 2007 Forms
8606

2002
(you had an amount on your
2002 Form 8606, line 21)

The excess, if any, of your 2002
Form 8606, line 22, over
line 21 of that Form 8606.

Line 16 of your 2003
through 2007
Forms 8606

2001
(you had an amount on your
2001 Form 8606, line 21)

The excess, if any, of your 2001
Form 8606, line 22, over
line 21 of that Form 8606.

Line 16 of your 2002
through 2007
Forms 8606

2000
(you had an amount on your
2000 Form 8606,
line 19)

The excess, if any, of your 2000
Form 8606, line 25, over
line 19 of that Form 8606.

Line 16 of your 2001
through 2007 Forms
8606

1999
(you had an amount on your
1999 Form 8606,
line 19)

The excess, if any, of your 1999
Form 8606, line 25, over
line 19 of that Form 8606.

Line 14c of your 2000
Form 8606 and line 16
of your 2001 through
2007
Forms 8606

1998
(you had an amount on your
1998 Form 8606,
line 20)

The excess, if any, of your 1998
Form 8606, line 14c, over
line 20 of that Form 8606.

Line 14c of your 1999
and 2000 Forms 8606
and line 16 of your
2001 through 2007
Forms 8606

Did not have such a
The amount from your 2007 Form
distribution in excess of your
8606, line 16.
basis in contributions

Line 14c of your 1998,
1999, and 2000 Forms
8606 and line 16 of
your 2001 through
2006 Forms 8606

*Excluding rollovers, recharacterizations, and contributions that you had returned to you.
**Refigure line 23 without taking into account any amount entered on Form 8606, line 20.

-8-

Privacy Act and Paperwork
Reduction Act Notice. We ask for the
information on this form to carry out the
Internal Revenue laws of the United
States. We need this information to
ensure that you 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 if
you made certain contributions or
received certain distributions from
qualified plans, including IRAs, and
other tax-favored accounts. Our legal
right to ask for the information
requested on this form is sections
6001, 6011, 6012(a), and 6109 and
their regulations. The reason we need
your social security number is to secure
proper identification in order to gain
access to the tax information in our files
to properly process the form.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records
relating to a form or its instructions
must be retained as long as their
contents may become material in the
administration of any Internal Revenue
law. Generally, tax returns and return
information are confidential, as required
by section 6103. However, we may give
the information to the Department of
Justice for civil and criminal litigation,
and to cities, states, and the District of
Columbia to carry out their tax laws. We
may also disclose this information to
other countries under a tax treaty, to
federal and state agencies to enforce
federal nontax criminal laws, or to
federal law enforcement and
intelligence agencies to combat
terrorism.
The average time and expenses
required to complete and file this form
will vary depending on individual
circumstances. For the estimated
averages, see the instructions for your
income tax return.
If you have suggestions for making
this form simpler, we would be happy to
hear from you. See the instructions for
your income tax return.