- What Form 8606 reports
- When you must file it
- The pro-rata catch with conversions
- Penalties and when to file
- The records the IRS tells you to keep
- Roth IRA distributions on Form 8606
- Fixing a contribution: returns and recharacterizations
- What doesn't count as a distribution here
- My advice
- Frequently asked questions
Form 8606 is how the IRS keeps track of savings you've already paid tax on inside a traditional IRA (your basis), and how it works out the taxable part of Roth conversions and some Roth IRA payouts. As of October 2026, skipping it when you made a nondeductible contribution costs a $50 penalty unless you can show reasonable cause, and losing track of your basis can mean paying tax twice.
This is the form behind the 'backdoor Roth' and behind every traditional IRA that mixes deductible and after-tax contributions. It's dull, it's short, and it's the one people forget for years. The rules here come from the IRS's 2025 instructions for Form 8606.
What Form 8606 reports
The IRS gives four uses:
- Nondeductible contributions you made to traditional IRAs
- Distributions from traditional IRAs, if you have a basis in them
- Conversions from traditional IRAs to Roth IRAs
- Distributions from Roth IRAs
Employer contributions to a SEP IRA or a SIMPLE IRA aren't nondeductible contributions for this purpose, so they don't go on the form.
When you must file it
| Situation | File Form 8606? |
|---|---|
| You made a nondeductible traditional IRA contribution | Yes |
| You took a traditional IRA distribution and your basis is more than zero | Yes |
| You converted a traditional IRA to a Roth IRA | Yes |
| You took a Roth IRA distribution (not a rollover, recharacterization or return of certain contributions) | Yes |
| You inherited a traditional IRA with basis, or took a non-qualified distribution from an inherited Roth IRA | Yes, possibly more than one |
| An IRA was moved to a spouse in a divorce and the basis changed | Yes |
| Only distributions from a traditional IRA and you've never made nondeductible contributions | No, report them on Form 1040 lines 4a and 4b |
The pro-rata catch with conversions
Here's the rule that surprises people. When you take cash out of a traditional IRA or convert it, line 6 asks for the total value of all your traditional IRAs as of December 31, plus any outstanding rollovers. Your basis is spread across all of it.
So if you put after-tax savings into a new IRA and convert it, but you also have an old pre-tax IRA sitting elsewhere, you can't pick the after-tax dollars. Part of the conversion is taxable because the form looks at every traditional IRA you own on December 31. Check what else you hold before you convert, not after.
Penalties and when to file
- $50 for not filing Form 8606 to report a nondeductible contribution, unless you show reasonable cause.
- $100 for overstating your nondeductible contributions, unless you show reasonable cause.
- File it with Form 1040, 1040-SR or 1040-NR by the due date, including extensions.
- If you don't have to file a tax return but do need Form 8606, sign it and send it to the IRS at the time and place you'd have filed your return, with your address on page 1.
Those amounts are the ones in the instructions as of October 2026.
The records the IRS tells you to keep
Keep these until every dollar has come out of your IRAs, which could be decades:
- Page 1 of your Form 1040 for each year you made a nondeductible contribution
- Every Form 8606, with any statements and worksheets
- Your Forms 5498 showing contributions and year-end values
- Your Forms 1099-R for each year you took a distribution
Without those, you can't prove your basis, and the safe assumption for the IRS is that everything coming out is taxable.
Roth IRA distributions on Form 8606
Part III works out whether a Roth IRA distribution is taxable. A qualified distribution generally needs the 5-year period to have passed, counted from the first year a contribution, conversion or rollover went into a Roth IRA for you. Rollovers, recharacterizations and returns of certain contributions are left off line 19.
If part of a Roth payout is taxable and you're under 59½, an additional tax may apply, and that's reported on Form 5329 rather than here.
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Fixing a contribution: returns and recharacterizations
Two routes let you undo a contribution, and they're treated differently on Form 8606.
- Return of a contribution: if you take back a contribution for the year, plus any earnings (or minus any loss), by your return's due date including extensions, it's treated as never made. You don't report it on Form 8606 and you don't deduct it, but the earnings go on your Form 1040.
- Recharacterization: you can move a contribution from one type of IRA to another by a trustee-to-trustee transfer, generally by the due date including extensions. If you filed on time without doing it, you've got 6 months from the due date (excluding extensions) and may need an amended return marked 'Filed pursuant to section 301.9100-2'.
- What you can't recharacterize: conversions made in 2018 or later. Once a traditional IRA is converted to a Roth, the decision is final.
That last point is why the conversion step deserves more thought than the contribution. You can change your mind about a contribution. You can't change your mind about a conversion.
What doesn't count as a distribution here
For deciding whether you need the form because of a traditional IRA payout, the IRS leaves out rollovers, qualified charitable distributions, a one-time distribution to fund an HSA, conversions, recharacterizations and returns of certain contributions. If one of those is your only movement in the year and you've no basis to track, you may not need Form 8606 at all.
My advice
If you ever make a nondeductible IRA contribution, file Form 8606 that year, every time, and keep a copy with your tax records forever. It's the only paper trail that stops after-tax savings being taxed again when you retire. And before any Roth conversion, add up every traditional IRA you'll own on December 31.
Frequently asked questions
Do I need Form 8606 for a backdoor Roth?
Yes. The nondeductible contribution goes in Part I and the conversion in Part II, and both affect how much of the conversion is taxable.
What's the penalty for not filing Form 8606?
As of October 2026 it's $50 if you don't report a nondeductible contribution, unless you show reasonable cause. Overstating nondeductible contributions is $100.
Can I file Form 8606 for a past year?
Yes. If you don't need a tax return that year, sign the form and send it on its own to where you'd have filed the return.
Why does my old IRA affect my conversion?
Line 6 uses the value of all your traditional IRAs on December 31, so your basis is spread across every account, not just the one you converted.
