General Instructions

Changes To Note

• You, and your spouse if filing jointly, can now contribute up to $3,000 ($3,500 if age 50 or older at the end of 2002) to your IRA. See Overall Contribution Limit for Traditional and Roth IRAs on page 2.
• Taxable distributions from Coverdell education savings accounts are now reported on Form 1040. For more details, see the Instructions for Form 1040, line 21.

Purpose of Form

Use Form 8606 to report:

• Nondeductible contributions you made to traditional IRAs,
• Distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs,
• Distributions from Roth IRAs, and
• Conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs.

Additional information. See Pub. 590, Individual Retirement Arrangements (IRAs), for more details on IRAs.

If you received distributions from a traditional, SEP, or SIMPLE IRA in 2002 and you have never made nondeductible contributions to traditional IRAs, do not report the distributions on Form 8606. Instead, see the instructions for Form 1040, lines 15a and 15b; Form 1040A, lines 11a and 11b; or Form 1040NR, lines 16a and 16b. Also, to find out if any of your contributions to traditional IRAs are deductible, see the instructions for Form 1040, line 24; Form 1040A, line 17; or Form 1040NR, line 25.

Who Must File

File Form 8606 if any of the following apply.

• You made nondeductible contributions to a traditional IRA for 2002.
• You received distributions from a traditional, SEP, or SIMPLE IRA in 2002 (other than a rollover, conversion, recharacterization, or return of certain contributions) and your basis in traditional IRAs is more than zero.
• You converted an amount from a traditional, SEP, or SIMPLE IRA to a Roth IRA in 2002 (unless you recharacterized the entire conversion - see page 3).
• You received distributions from a Roth IRA in 2002 (other than a rollover, recharacterization, or return of certain contributions - see page 7).

Note: If you recharacterized a 2002 Roth IRA contribution as a traditional IRA contribution, or vice versa, treat the contribution as having been made to the second IRA, not the first IRA. See page 3.

You do not have to file Form 8606 solely to report regular contributions to Roth IRAs. But see What Records Must I Keep? on page 5.

When and Where To File

File Form 8606 with your 2002 Form 1040, 1040A, or 1040NR. If you are not required to file an income tax return but are required to file Form 8606, sign Form 8606 and send it to the Internal Revenue Service at the same time and place you would otherwise file Form 1040, 1040A, or 1040NR.

Maximum Roth IRA Contribution Worksheet (keep for your records)

Caution: If married filing jointly and the combined taxable compensation (defined on this page) for you and your spouse is less than $6,000 ($6,500 if one spouse is 50 or older at the end of 2002; $7,000 if both spouses are 50 or older at the end of 2002), do not use this worksheet. Instead, see Pub. 590 for special rules.
1	If married filing jointly, enter $3,000 ($3,500 if age 50 or older at the end of 2002). All others, enter the smaller of $3,000 ($3,500 if age 50 or older at the end of 2002) or your taxable compensation (defined on this page)	1
2	Enter your total contributions to traditional IRAs for 2002	2
3	Subtract line 2 from line 1	3
4	Enter: $160,000 if married filing jointly; $10,000 if married filing separately and you lived with your spouse at any time in 2002. All other(s), enter $110,000	4
5	Enter your modified AGI for Roth IRA purposes (see above)	5
6	Subtract line 5 from line 4. If zero or less, stop here; you may not contribute to a Roth IRA for 2002. See Recharacterizations on page 3 if you made Roth IRA contributions for 2002	6
7	If line 4 above is $110,000, enter $15,000; otherwise, enter $10,000. If line 6 is more than or equal to line 7, skip lines 8 and 9 and enter the amount from line 3 on line 10	7
8	Divide line 6 by line 7 and enter the result as a decimal (rounded to at least 3 places). If the result is 1.000 or more, enter 1.000	8
9	Multiply line 1 by line 8. If the result is not a multiple of $10, increase it to the next multiple of $10 (for example, increase $490.30 to $500). Enter the result, but not less than $200	9
10	Maximum 2002 Roth IRA Contribution. Enter the smaller of line 3 or line 9. See Recharacterizations on page 3 if you contributed more than this amount to Roth IRAs for 2002	10

Basis in Regular Roth IRA Contributions - Line 20

IF the most recent year prior to 2002 in which you took a Roth IRA distribution* was...	THEN enter on Form 8606, line 20, this amount...	PLUS the total of all your regular contributions** to Roth IRAs for...
2001 (you had an amount on your 2001 Form 8606, line 19)	The excess of your 2001 Form 8606, line 20, over line 19 of that Form 8606.	2002
2000 (you had an amount on your 2000 Form 8606, line 17)	The excess of your 2000 Form 8606, line 18d, over line 17 of that Form 8606	2001 and 2002
1999 (you had an amount on your 1999 Form 8606, line 17)	The excess of your 1999 Form 8606, line 18d, over line 17 of that Form 8606	2000 through 2002
1998 (you had an amount on your 1998 Form 8606, line 18)	The excess of your 1998 Form 8606, line 19c, over line 18 of that Form 8606	1999 through 2002
Did not take a Roth IRA distribution* prior to 2002	$0	1998 through 2002
*Excluding rollovers, recharacterizations, and contributions that you had returned to you.
**Excluding rollovers, conversions, Roth IRA contributions that were recharacterized, and any contributions that you had returned to you.

Basis in Roth IRA Conversions - Line 22

IF the most recent year prior to 2002 in which you had a distribution* in excess of your basis in contributions was...	THEN enter on Form 8606, line 22, this amount...	PLUS the sum of the amounts on the following lines...
2001 (you had an amount on your 2001 Form 8606, line 21)	The excess, if any, of line 22 of your 2001 Form 8606 over line 21 of that Form 8606	Line 16 of your 2002 Form 8606
2000 (you had an amount on your 2000 Form 8606, line 19)	The excess, if any, of line 25 of your 2000 Form 8606 over line 19 of that Form 8606	Line 16 of your 2001 and 2002 Forms 8606
1999 (you had an amount on your 1999 Form 8606, line 19)	The excess, if any, of line 25 of your 1999 Form 8606 over line 19 of that Form 8606	Line 14c of your 2000 Form 8606 and line 16 of your 2001and 2002 Forms 8606
1998 (you had an amount on your 1998 Form 8606, line 20)	The excess, if any, of line 14c of your 1998 Form 8606 over line 20 of that Form 8606	Line 14c of your 1999 and 2000 Forms 8606 and line 16 of your 2001and 2002 Forms 8606
Did not have such a distribution in excess of your basis in contributions	The amount from line 16 of your 2002 Form 8606	Line 14c of your 1998, 1999, and 2000 Forms 8606 and line 16 of your 2001 Form 8606
*Excluding rollovers, recharacterizations, and contributions that you had returned to you.

Definitions

Traditional IRAs

For purposes of Form 8606, a traditional IRA is an individual retirement account or an individual retirement annuity other than a SEP, SIMPLE, or Roth IRA.

Contributions. An overall contribution limit applies to traditional IRAs and Roth IRAs. See page 2. Contributions to a traditional IRA may be fully deductible, partially deductible, or completely nondeductible.

Basis. Your basis in traditional IRAs is the total of all your nondeductible contributions to traditional IRAs minus the total of all your nontaxable distributions, adjusted if necessary (see the instructions for line 2 on page 6). Keep track of your basis to figure the nontaxable part of your future distributions.

SEP IRAs

A simplified employee pension (SEP) is an employer-sponsored plan under which an employer can make contributions to traditional IRAs for its employees. If you make contributions to that IRA (excluding employer contributions you make if you are self-employed), they are treated as contributions to a traditional IRA, and may be deductible or nondeductible. SEP IRA distributions are reported in the same manner as traditional IRA distributions.

SIMPLE IRAs

Your participation in your employer's SIMPLE IRA plan does not prevent you from making contributions to a traditional, SEP, or Roth IRA.

Roth IRAs

A Roth IRA is similar to a traditional IRA, but has the following features.

• Contributions are never deductible.
• Contributions can be made after the owner reaches age 70½.
• No minimum distributions are required during the Roth IRA owner's lifetime.
• Qualified distributions are not includible in income.

Generally, a qualified distribution is any distribution made:

• On or after age 59½,
• Upon death,
• Due to disability, or
• For qualified first-time homebuyer expenses.

Exception. Any distribution made during the 5-year period beginning with the first year for which you made a Roth IRA contribution or conversion is not a qualified distribution, and may be taxable. Because 1998 was the first year for which Roth IRA contributions or conversions could be made, no Roth IRA distribution prior to 2003 is a qualified distribution.

Contributions. You can contribute to a Roth IRA for 2002 only if your 2002 modified adjusted gross income (AGI) for Roth IRA purposes is less than:

• $10,000 if married filing separately and you lived with your spouse at any time in 2002,
• $160,000 if married filing jointly, or
• $110,000 if single, head of household, or qualifying widow(er), or if married filing separately and you did not live with your spouse at any time in 2002.

Use the Maximum Roth IRA Contribution Worksheet below to figure the maximum amount you can contribute to a Roth IRA for 2002. If you are married filing jointly, complete the worksheet separately for you and your spouse.

If you contributed too much, see Recharacterizations on page 3.

Modified AGI for Roth IRA purposes. First, figure your AGI (Form 1040, line 36; Form 1040A, line 22; or Form 1040NR, line 35). Then, refigure it by:

1. Subtracting any amount due to Roth IRA conversions included on Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b; and
2. Adding the total of the following.
   • IRA deduction from Form 1040, line 24; Form 1040A, line 17; or Form 1040NR, line 25.
   • Student loan interest deduction from Form 1040, line 25; Form 1040A, line 18; or Form 1040NR, line 26.
   • Tuition and fees deduction from Form 1040, line 26, or Form 1040A, line 19.
   • Exclusion of interest from Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989.
   • Exclusion of employer-provided adoption benefits from Form 8839, Qualified Adoption Expenses.
   • Foreign earned income exclusion from Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.
   • Foreign housing exclusion or deduction from Form 2555.

When figuring modified AGI for Roth IRA purposes, you may have to refigure items based on modified AGI, such as taxable social security benefits and passive activity losses allowed under the special allowance for rental real estate activities. See Can I Contribute to a Roth IRA? in Pub. 590 for details.

Distributions. See the instructions for Part III beginning on page 7.

Overall Contribution Limit for Traditional and Roth IRAs

If you are not married filing jointly, your limit on contributions to traditional and Roth IRAs is the smaller of $3,000 ($3,500 if age 50 or older at the end of 2002) or your taxable compensation (defined below). If you are married filing jointly, your contribution limit is generally $3,000 ($3,500 if age 50 or older at the end of 2002) and your spouse's contribution limit is $3,000 ($3,500 if age 50 or older at the end of 2002) as well. But if the combined taxable compensation of both you and your spouse is less than $6,000 ($6,500 if one spouse is 50 or older at the end of 2002; $7,000 if both spouses are 50 or older at the end of 2002), see Pub. 590 for special rules. This limit does not apply to employer contributions to a SEP or SIMPLE IRA.

The amount you may contribute to a Roth IRA may also be limited by your modified AGI (see Contributions and the Maximum Roth IRA Contribution Worksheet on this page).

Taxable compensation includes the following.

• Wages, salaries, tips, etc. If you received a distribution from a nonqualified deferred compensation plan or nongovernmental section 457 plan that is included in box 1 of your W-2 form, do not include that distribution in taxable compensation. The distribution should be shown in box 11 of your W-2 form. If it is not, contact your employer for the amount of the distribution.
• Self-employment income. If you are self-employed (a sole proprietor or a partner), taxable compensation is your net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by your deduction for contributions made on your behalf to retirement plans and the deduction allowed for one-half of your self-employment tax.
• Alimony and separate maintenance.

See Pub. 590 for details.

Note: Rollovers and Roth IRA conversions do not affect your contribution limit.

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