When would you file Form 8606?

Prepare for the Jackson Hewitt Tax Test with our comprehensive study guide featuring multiple-choice questions, hints, and detailed explanations. Ace your examination with confidence!

Multiple Choice

When would you file Form 8606?

Form 8606 is used whenever you need to establish and track after-tax amounts in your traditional IRAs and to report Roth conversions. If you contribute nondeductible (after-tax) money to a traditional IRA, you file Form 8606 to record your basis. Later, when you take distributions, the form helps determine how much of that distribution is non-taxable because it comes from basis rather than pre-tax money. You also file Form 8606 to report conversions from a traditional (or SEP/SIMPLE) IRA to a Roth IRA, so the taxable portion of the conversion can be calculated and your basis in the Roth can be tracked going forward. This form isn’t used for wage income, which goes on the W-2; it isn’t used for claiming the standard deduction; and Form 2555 is for the foreign earned income exclusion.

Form 8606 is used whenever you need to establish and track after-tax amounts in your traditional IRAs and to report Roth conversions. If you contribute nondeductible (after-tax) money to a traditional IRA, you file Form 8606 to record your basis. Later, when you take distributions, the form helps determine how much of that distribution is non-taxable because it comes from basis rather than pre-tax money. You also file Form 8606 to report conversions from a traditional (or SEP/SIMPLE) IRA to a Roth IRA, so the taxable portion of the conversion can be calculated and your basis in the Roth can be tracked going forward. This form isn’t used for wage income, which goes on the W-2; it isn’t used for claiming the standard deduction; and Form 2555 is for the foreign earned income exclusion.

More practice questions