How to File Form 8606 for Nondeductible IRAs and Backdoor Roths

It’s easy to forget about Form 8606 until the IRS sends a surprise tax bill. 

If you’ve ever added after-tax money to a traditional IRA or used the backdoor Roth strategy, this simple but important form helps you avoid being taxed twice on the same dollars.

Form 8606 tells the IRS which portion of your IRA contributions was already taxed. It also comes into play when you convert to a Roth IRA or take distributions from an account that holds both pre-tax and after-tax funds. Missing it can lead to penalties or confusion down the line.

In this guide, you’ll learn when Form 8606 is required, how to fill it out for a backdoor Roth, how the pro-rata rule works, and what mistakes to avoid to help your strategy go smoothly.

📌 Also read: Roth IRA Pros and Cons to Know Before You Contribute

When and Why You Must File Form 8606

If you have any after-tax money in your IRA, the IRS expects you to tell them about it — every time you contribute, convert, or withdraw. That’s the main job of Form 8606: to report the nondeductible portion of your IRA activity and ensure you aren’t taxed twice on the same dollars.

It’s not optional. The IRS lists specific events that trigger the requirement to file. If any of the situations below apply for a given tax year, you’re required to submit Form 8606 with your return.

Common Triggers That Require Form 8606

✅ You made a nondeductible contribution to a traditional IRA.

This applies if you added after-tax money, usually because your income was too high to deduct the contribution.

✅ You converted any amount from a traditional, SEP, or SIMPLE IRA to a Roth IRA.

This is the key step in a backdoor Roth strategy and is always reported in Part II of Form 8606.

✅ You took a distribution from any traditional, SEP, or SIMPLE IRA and had basis (after-tax money) in any IRA.

This includes any withdrawals where your IRA had a mix of pre-tax and after-tax dollars. Form 8606 is used to calculate the tax-free portion.

✅ You took a Roth IRA distribution that may be taxable.

While this isn’t common with backdoor Roths, it’s still a separate trigger listed in the IRS instructions (reported in Part III).

📝 Note: If you skip Form 8606 when required, the IRS may assume all of your IRA activity is taxable even if part of it shouldn’t be.

Timing and Penalties

Form 8606 is filed with your Form 1040 by the normal tax deadline, including extensions. If you don’t otherwise need to file a tax return, the IRS still requires you to submit a signed Form 8606 by the same due date and to the same address you would have sent your Form 1040.

Failing to file comes with its own costs:

❌ $50 penalty for missing Form 8606 when you were required to report a nondeductible contribution (unless you show reasonable cause)

❌ $100 penalty if you overstate your nondeductible contributions or IRA basis (again, unless you show reasonable cause)

📝 Note: You can contribute to a traditional IRA for 2025 up until the regular tax deadline in 2026, not including extensions. That means even if you make the contribution next year, it still counts toward this year, and you’d file Form 8606 along with your return.

Steps to Completing Form 8606 for a Backdoor Roth

A backdoor Roth IRA is simply a two-step process: you make a nondeductible contribution to a traditional IRA, then convert that amount to a Roth IRA. Form 8606 is what tells the IRS what you did, so they can track how much of the conversion is taxable and how much isn’t.

To report this properly, you’ll complete Part I and Part II of Form 8606. Part I tracks your basis which is the after-tax money in your IRAs. Part II reports the Roth conversion and calculates how much is taxable.

Filing correctly helps you avoid unexpected taxes and ensures your nondeductible contributions aren’t taxed twice.

Part I: Reporting Contributions and Basis

To get started with Form 8606, you’ll begin in Part I, which reports any after-tax IRA contributions and calculates how much of your conversion is taxable.

Step 1: Report Your Nondeductible Contribution (Line 1)

Enter the amount of your nondeductible traditional IRA contribution for the year. This is the after-tax amount you contributed. Use the IRA Deduction Worksheet from the Form 1040 instructions or the worksheet in IRS Publication 590-A to help you identify the correct number.

Step 2: Add Any Prior-Year Basis (Line 2)

Enter the total basis (after-tax money) from previous years. If this is your first time making a nondeductible IRA contribution, this number is usually zero. If not, you’ll carry forward the amount from your most recent Form 8606 or use the Total Basis Chart provided in the instructions.

📝 Note: If you made nondeductible IRA contributions in past years but didn’t file Form 8606 at the time, the IRS may still accept a retroactive submission to properly establish your basis record.

Step 3: Enter the Year-End IRA Balance (Line 6)

List the December 31 value of all your traditional, SEP, and SIMPLE IRAs. This figure is key to the pro-rata calculation, which determines the tax-free portion of your conversion. Most IRA providers send a Form 5498 by the end of January that shows this year-end balance.

Step 4: Include Your Roth Conversion (Line 8)

If you converted any amount to a Roth IRA, enter the converted amount on line 8. This number is used in later calculations to figure out how much of the conversion is taxable and how much is tax-free.

Step 5: Complete the Taxable/Nontaxable Breakdown (Lines 6–15)

Form 8606 walks you through the math from lines 6 to 15. It applies your basis (steps 1 and 2) to your total IRA balance (step 3) and your conversion (step 4).

This carryforward is important if you plan to continue doing nondeductible contributions or backdoor Roth conversions in the future.

Part II: Reporting the Roth Conversion

Once Part I is complete, it’s time to report the actual Roth conversion in Part II of Form 8606. This section calculates how much of your conversion is taxable and how much is not, based on the after-tax dollars you already reported.

Step 1: Enter the Total Amount Converted (Line 16)

On line 16, write the full amount you converted from your traditional IRA to a Roth IRA during the year.

If you already reported the conversion amount on line 8 in Part I, the form instructions will explain how to carry that figure over to this section.

Step 2: Pull in the Basis Applied to the Conversion (Line 17)

Line 17 accounts for the basis that offsets the taxable portion of your conversion.

This usually includes your prior-year basis (from line 2) and any current-year nondeductible contribution (from line 1) that was made before the conversion.

Step 3: Calculate the Taxable Portion (Line 18)

On line 18, subtract your basis (line 17) from the converted amount (line 16).

The result is the taxable portion of your Roth conversion. This is treated as ordinary income and reported on your Form 1040 for the year.

📝 Note: Many tax software programs will complete Part II automatically once you input:

Still, it’s good to understand what’s happening behind the scenes so you can verify the numbers.

If you’re filing on paper, keep a copy of last year’s Form 8606 nearby. You’ll need it to accurately track your carryforward basis and avoid overstating or understating taxable income.

Pro-Rata Calculation

The pro-rata rule makes Form 8606 a little more complex. When you convert or withdraw money from an IRA, the IRS doesn’t let you cherry-pick only your after-tax dollars. Instead, it assumes your IRA contains a proportional mix of pre-tax and after-tax funds.

That means every conversion or withdrawal is split between taxable and nontaxable portions, based on how much basis you have compared to your total IRA balance at the end of the year.

✏️ Hypothetical Example: 

Suppose you:

Your total basis is $10,000. The IRS considers your total IRA value for pro-rata to be:

$40,000 (year-end balance) + $10,000 (converted) = $50,000

Then it calculates:

$10,000 basis ÷ $50,000 total = 20%

So 20% of your conversion is nontaxable:

📝 Note: The IRS instructions and Publication 590-B explain in detail how to include “outstanding rollovers” and other special cases that might affect the total used in this calculation.

How to Avoid Common Form 8606 Errors 

One of the biggest mistakes with a nondeductible IRA is losing track of your basis. This refers to the after-tax contributions you already reported to the IRS. If the basis is not reported correctly, the IRS may treat all future withdrawals or conversions as fully taxable.

This is where Form 8606 becomes important. It creates a record that shows which portion of your IRA money has already been taxed. If you make a nondeductible contribution, convert to a Roth IRA, or take a distribution involving after-tax dollars, you need to file this form to keep your tax records accurate.

How Basis Mistakes Happen

Here are the most common ways these errors occur:

❌ Confusing the tax year for contributions.

You’re allowed to make a prior-year IRA contribution up until your tax filing deadline (typically April of the following year). But when you fill out Form 8606, make sure you assign the contribution to the correct tax year.

For example, a $7,000 contribution made in March 2026 could apply to 2025, but only if you designate it correctly. Mislabeling the year causes your basis carryforward to break down.

❌ Skipping Form 8606 when required.

If you make a nondeductible contribution or take a distribution from an IRA with basis, the IRS expects you to file Form 8606. Missing it can lead to:

❌ Treating a conversion as fully tax-free.

Even if this year’s contribution was after-tax, that doesn’t mean the whole conversion is tax-free. If you have other pre-tax IRA money, the pro-rata rule applies. That means only part of your conversion may be tax-free, based on your total IRA balances.

❌ Misreporting recharacterizations or returned contributions.

If you recharacterize a contribution (e.g., switch from Roth to traditional) or withdraw it before the deadline, you may not need to report it on Form 8606 at all. However, you do need to explain it in a written statement. These special cases are detailed in the form instructions and are often missed.

📝 Note: Once basis is lost or misreported, it can be hard to fix. Double taxation is a real risk if the IRS believes your conversion or withdrawal was 100% pre-tax.

Keep the Right Records Indefinitely

The IRS recommends holding on to all relevant documents until your entire IRA balance is withdrawn. In reality, this means keeping some files for decades.

Here’s what you should save:

✅ Every Form 8606 you’ve ever filed
✅ Supporting worksheets or written statements (e.g., for recharacterizations)
✅ Form 1040 (page 1) for each year you made nondeductible contributions
✅ Each year’s Form 5498, which confirms contribution amounts and year-end balances
✅ Every Form 1099-R that reports a distribution or Roth conversion

📝 Note: These forms all work together to prove your basis and keep your backdoor Roth tax-free when it should be. Losing them raises audit risk and complicates retirement planning later.

How to Audit-Proof Your Backdoor Roth

The best way to protect yourself is to keep a clear, organized record of your IRA activity each year.

1) Create a “basis file” for every tax year. Include:

2) Before you file:

If you catch an error, such as missing basis, a misdated contribution, or the wrong 8606 year, you can fix it. The IRS allows you to file an amended Form 8606 using Form 1040-X. If your case involves a recharacterization or returned contribution, attach an explanation as required in the instructions.

Wrapping It Up

Form 8606 plays an important role in keeping your IRA tax reporting accurate. Filing it correctly helps prevent double taxation and keeps your records in sync with IRS expectations.

Before filing, review your custodian forms carefully. Make sure the numbers on Form 1099-R and Form 5498 match what appears on Form 8606. If they don’t, it may be worth double-checking with your provider or tax software.

If you notice an error after filing, the IRS allows you to fix it. You can submit a corrected Form 8606 with Form 1040-X and include a short explanation when needed.

Keeping organized records year by year can reduce stress later. When your IRA situation gets more complex, getting a second review from a tax professional may help you avoid issues.

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