Form 8606: How to Report Nondeductible IRAs and Track Basis (2026)

Form 8606 is the IRS tax form for keeping track of all of your after-tax money (the "basis") in your traditional IRAs. The IRS requires this filing when you make a non-deductible contribution to a traditional IRA, convert a traditional IRA to a Roth, or withdraw any money from an IRA that has basis. The sole purpose of the form is to show proof that you have already been taxed on these funds so the IRS will not be taxing them again as well.

Many taxpayers simply ignore Form 8606 as if it were an additional piece of paper to file with their tax returns. If they do this, there will be no documentation with the IRS about your original cost basis for those funds. Therefore when you withdraw that money, the IRS may once again consider that dollar amount taxable income.

What is IRS Form 8606?

The IRS Form 8606 entitled Nondeductible IRAs is the single-page tax form used for tracking all after-tax contributions made to traditional IRAs and calculating their basis. On the About Form 8606 Page, the IRS states that the form reports non-deductible contributions, distributions from IRAs that have basis, conversions from traditional IRAs, SEP-IRAs and/or SIMPLE IRAs to Roth IRAs.^[1] Basis is money that was contributed and never deducted, because these contributions had been previously taxed and are now to be prevented from being double-taxed. Therefore, a non-deductible contribution should be received by an individual free of tax only if he/she has documentation to support his/her claim of prior taxation. Each filing also carries forward the basis of the previous years' contributions. If an individual misses a filing period, then the basis is lost to the IRS and the distribution is fully taxable.

What are the three parts of Form 8606?

The form breaks down into three different parts. However, you only need to fill-out those that apply to your specific tax-year and they relate to separate events: i.e. Adding after-tax dollars to an IRA, converting the funds from one type of account (e.g. Traditional) to another type (i.e. Roth), removing funds from your account. Each section will report on:

The Instructions for Form 8606 go through each line of the Parts individually to explain each one.^[2] This is where the backdoor Roth IRA appears on paper because this is when you have made a Part I nondeductible contribution followed by a Part II conversion. The ordering rules live in the Roth IRA withdrawal rules if you make an early Roth withdrawal, and they apply under Part III.

Who has to file Form 8606?

You must file Form 8606 if any of the three triggers below occur in a tax year and the specific trigger determines whether it is required (not based on income). A "trigger" occurs for nondeductible contributions made into a Traditional IRA. Many people make these contributions because their income will not allow them to deduct contributions. Additionally, a "trigger" also occurs when a person converts a Traditional IRA, SEP-IRA, or SIMPLE-IRA to a Roth IRA. A third "trigger" occurs when there is a withdrawal from a Traditional IRA in which you are holding basis at that time or a premature/early/non-qualified withdrawal from a Roth IRA. Internal Revenue Code section 408(o) provides the definition of "designated nondeductible contributions" and requires the filing of this report.^[3] One quirk: each spouse files a separate form, because basis belongs to the individual owner and never combines on a joint return.

What happens if you do not file Form 8606?

The Form 8606, skipping this is NOT harmless as it will be penalized by the Tax Code. A $50 penalty is assessed under Internal Revenue Code section 6693 for every failure to file a required Form 8606, with a $100 penalty for every over statement of your nondeductible contribution. However, these penalties can be waived if you demonstrate reasonable cause.^[4] The $50 is the little problem. The large problem is that when the IRS no longer has evidence that you paid taxes on that money, you have to report the entire later distribution as taxable income, so you are paying double tax. This is an easily corrected matter: file a standalone Form 8606 for the omitted year, without amending that year's return, prior to withdrawing from the account.

How does basis carry forward on line 14?

Form 8606 records an ongoing (lifetime) basis for you. That basis is then rolled forward by line 14 to show what you have as of year end. This number is used as the starting basis in your next year's Form. Because a prior year's basis was never established when one year is missing it breaks the continuous basis chain.

You use the same line 14 amount for your basis that the pro rata rule uses when you have other pre tax IRAs. This is one reason why people who have a SEP or SIMPLE account are so careful about their IRA conversions. Since you fund an IRA from income from self employment, your self-employed IRA contribution limits will determine how much you can contribute, and for 2026 the personal IRA contribution limit is $7,500. Any part you cannot deduct becomes basis in Part I.^[5]

The Bottom Line

The form is Form 8606 of the IRS. This is where you record the after tax amount (basis) you have put into your traditional IRA accounts. You never pay taxes on those dollars again when you take distributions. Use this to report nondeductible contributions, any conversions to Roth, or any withdrawals from an account with basis. You will need to carry over the number on line 14 each year. If you did not submit one previously, you can do so as a stand-alone form at anytime prior to withdrawing.

This guide is educational and summarizes IRS rules for Form 8606 and nondeductible IRAs. It is not investment, legal, or tax advice. Your account records and current IRS instructions control. Talk to your tax advisor about your own circumstances.