Contributions to a traditional individual retirement account (IRA) may be either deductible or non-deductible. Eligibility for deductible contributions depends on your income and participation in an employer retirement plan. Nondeductible contributions are treated differently when you withdraw from your traditional IRA, or convert it to a Roth IRA. You may need to do some research to determine the amount of old IRA contributions that were nondeductible.
5498 Form for IRA Contributions
If you make any IRA contribution during the year, the trustee of the IRA account must send you documentation of the total of your contributions for the year on Internal Revenue Service Form 5498. This form also details if your contributions are traditional or Roth IRA contributions, the balance of the account, as well as your personal identifying information. While an important document, Form 5498 does not show if a contribution was deductible or non-deductible.
8606 Form for Nondedeductible Contributions
You are required to report all nondeductible IRA contributions on Form 8606. In addition, this form is used for Roth IRA conversions and Roth IRA distributions. Form 8606 includes calculations of the tax basis, or the total of all nondeductible IRA contributions. Each 8606 keeps a running total of all nondeductible contributions, so it serves as proof that you have made nondeductible contributions.
Get Copies of Your 8606
You should keep these 8606 forms indefinitely, but if you do not have copies, you can request copies of your tax transcripts from the IRS, detailing information on your previous returns, at no charge. You can request a transcript through the mail by sending Form 4506-T or Form 4506T-EZ to the IRS, by phone (800-908-9946) or online. If you used paid preparers to file your taxes, they can also provide you with copies.
Visit IRS.gov, click the search icon at the top of the page and enter "Get Transcript" in the search box to access this online tool. You'll need to create an online account and provide certain information to prove your identity. After you've created your account, you'll be able to view, download and print the information you need.
Previous Income Tax Returns
Review your previous years tax returns with copies of your Form 5498s. If you have Form 5498s for any year that show that you made a traditional IRA contribution, but the corresponding yearly tax return does not show a deduction for the contribution, then you did not claim a deduction for the contribution. This, alone, does not classify the contribution as non-deductible.
If You Didn't File 8606
If you did not deduct contributions to your traditional IRA and did not file Form 8606 declaring these contributions non-deductible for that year, then these contributions will be treated as deductible contributions. You will pay taxes on this money as income when you withdraw these contributions from the account.
To correctly classify these deductions and avoid this double taxation, you will need to file Form 8606 for each year that you had nondeductible contributions and did not file. As of 2019, the IRS can impose a penalty of $50 for each year that you did not file a Form 8606 on time.