How to Find Old Non-Deductible IRA Contributions & Avoid Double Taxes
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If you have been contributing to a traditional IRA for years, you may have a mix of deductible and non-deductible contributions in the account. Hence, it is important to distinguish between them, because if you lose track, you may end up paying taxes twice on the same money. The IRS uses Form 8606 to keep a record of non-deductible contributions, but if you never filed it or cannot find your copies, you will need to do some digging before taking withdrawals.
Understanding your contribution history is helpful to determine the basis in your IRA. Without proof, the IRS will assume your entire distribution is taxable, which may result in an unnecessary hit to your retirement savings.
Why Tracking Non-Deductible Contributions Matters
Most people can deduct their traditional IRA contributions on their tax return, but high earners who are covered by a workplace retirement plan may lose that deduction once their modified adjusted gross income exceeds IRS limits. Those contributions become non-deductible, but they can still grow tax-deferred until retirement.
When you eventually take withdrawals, only earnings and deductible contributions are taxable. Your non-deductible contributions should come out tax-free, but only if you can prove they were made with after-tax dollars. The Form 8606 provides that proof.
Here’s What Form 8606 Does
IRS Form 8606 tracks non-deductible contributions each year and calculates how much of your distribution is taxable versus tax-free. You must file it for every year you make an after-tax IRA contribution, convert a traditional IRA to a Roth IRA, or take a distribution when you have a mix of pre-tax and post-tax funds.
If you missed filing Form 8606 in a prior year, you can still fix the record by filing it retroactively. The IRS allows you to submit the form on its own, even if you are not otherwise required to file a tax return that year. Doing so prevents overpaying taxes on your future withdrawals.
How to Locate Old Contribution Records
The best place to start is with your old tax returns. Form 8606 should be attached to your Form 1040 or 1040NR for each year you made a non-deductible contribution. If you have misplaced the paperwork, you can request a transcript from the IRS showing previously filed forms. Your IRA custodian may also have annual contribution records you can use to reconstruct your basis.
Contribution Limits Still Apply
Even if your contribution is non-deductible, you must stay within the annual IRA limit — $6,000 per year (or $7,000 if you are 50 or older). These limits can change from year to year. Therefore, you need to check current IRS guidelines before making a contribution. If you exceed the limit, you may face a 6% penalty until the excess is removed.
Get Professional Help if Needed
Reconstructing non-deductible contributions over many years can be complicated, especially if you rolled money between accounts. A tax professional can help you correctly calculate your basis, file missing forms and avoid penalties.