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Instructions for Form 8606 (Revised 2001) 2002 Tax Year

Nondeductible IRAs (Contributions, Distributions and Basis)

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This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

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 10 of the worksheet (or the amount you chose to deduct on Form 1040, line 24, or Form 1040A, line 17, if less) from the smaller of line 8 or line 9 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 2002 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 may make nondeductible contributions up to your contribution limit. Enter on line 1 of Form 8606 your nondeductible contributions.

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 zero. Otherwise, use the chart below to find the amount to enter on line 2.

However, you may need to adjust or include an amount on this line if your basis changed since you last filed Form 8606 because of any of the following.

  • You had a return of excess traditional IRA contributions (see page 5).
  • Incident to divorce, you transferred or received part or all of a traditional IRA (see Distributions incident to divorce on this page).
  • 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 8606 you filed was for... THEN enter on line 2...
2001 The amount from 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 2002 in 2002 and 2003 and you have both deductible and nondeductible contributions, you may choose to treat the contributions made in 2002 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 2002.

Example.   You made contributions for 2002 of $1,500 in May 2002 and $1,500 in January 2003, of which $2,000 are deductible and $1,000 are nondeductible. You choose $1,000 of your contribution in 2002 to be nondeductible. You enter the $1,000 on line 1, but not line 4, and it becomes part of your basis for 2002.

Although the contributions to traditional IRAs for 2002 that you made from January 1, 2003, through April 15, 2003, can be treated as nondeductible, they are not included in figuring the nontaxable part of any distributions you received in 2002.

Line 6

Enter the total value of all your traditional, SEP, and SIMPLE IRAs as of December 31, 2002, plus any outstanding rollovers. A statement should be sent to you by January 31, 2003, showing the value of each IRA on December 31, 2002. However, if you recharacterized any amounts, enter on line 6 the total value taking into account all recharacterizations, including recharacterizations made after December 31, 2002.

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 within 60 days before the end of 2002 (from November 2 through December 31) that was rolled over after December 31, 2002, 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

CAUTION: If you received a distribution in 2002 from a traditional, SEP, or SIMPLE IRA and you also made contributions for 2002 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, 2002, and any outstanding rollovers included on line 6.
  • Distributions you rolled over to a qualified employer plan.
  • 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 5.
  • 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 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 2002, 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 2002 any portion that you recharacterized back to traditional, SEP, or SIMPLE IRAs in 2002 or 2003 (see Recharacterizations 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.

Line 15

If you were under age 59½ 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 58.

Part II - 2002 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 2002, 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 2002 and then recharacterized the amount back to a traditional, SEP, or SIMPLE IRA, you may not reconvert that amount until the later of January 1, 2003, or 30 days after the recharacterization. See Pub. 590 for details.

CAUTION: You may not convert any amount to Roth IRAs in 2002 if (a) your 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 2002. If you erroneously made a conversion, you must recharacterize the converted amount. See Recharacterizations 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 2002 Roth IRA distributions (other than rollovers, recharacterizations, or distributions of certain contributions - see page 4). Distributions from Roth IRAs are applied in the following order.

  1. Regular Roth IRA contributions. These amounts (not previously distributed) are shown on line 20. The distribution shown on line 19 is not included in income to the extent it does not exceed the amount on line 20.
  2. Amounts converted from traditional, SEP, or SIMPLE IRAs to Roth IRAs. These amounts (not previously distributed) are shown on line 22. The amount on line 21 is not included in income to the extent it does not exceed the amount on line 22.
  3. Earnings. Any remaining amount is earnings, which are included in income because the distribution is not a qualified distribution (see page 1). This amount is figured on line 23.

Line 19

Do not include on line 19 any of the following.

  • Distributions that you rolled over, including distributions made in 2002 and rolled over after December 31, 2002 (outstanding rollovers).
  • Recharacterizations.
  • Distributions that are a return of contributions under Return of IRA Contributions on page 4.
  • Distributions 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.

Line 20

Figure the amount to enter on line 20 as follows.

  • If you did not take a Roth IRA distribution before 2002 (other than an amount rolled over or recharacterized or a returned contribution), enter on line 20 the total of all your regular contributions to Roth IRAs for 1998 through 2002 (excluding rollovers and any contributions that you had returned to you), adjusted for any recharacterizations.
  • If you did take such a distribution before 2002, use the chart on page 7 to figure the amount to enter.
  • Increase or decrease the amount on line 20 by any basis transferred or received incident to divorce. Also attach a statement similar to the one explained under Distributions incident to divorce on page 6.

Line 22

Figure the amount to enter on line 22 as follows.

  • If you have never made a Roth IRA conversion, enter -0- on line 22.
  • If you took a Roth IRA distribution (other than an amount rolled over or recharacterized or a returned contribution) before 2002 in excess of your basis in regular Roth IRA contributions, use the chart on this page to figure the amount to enter on line 22.
  • If you did not take such a distribution before 2002, enter on line 22 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 and 2002 Forms 8606.
  • 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 under Distributions incident to divorce on page 6.

Additional 10% Tax

There generally is an additional 10% tax on 2002 distributions from a Roth IRA that are shown on line 21 if you were under age 59½ at the time of the distribution. The additional tax is figured in Part I of Form 5329. See the instructions for Form 5329, line 1, for details and exceptions.

Paperwork Reduction Act Notice.

We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

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.

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

Recordkeeping 1 hr. 4 min.
Learning about the law or the form 1 hr. 12min.
Preparing the form 49 min.
Copying, assembling, and sending the form to the IRS 41 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

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