Don’t pay tax twice: Follow non-deductible IRA contributions with Form 8606

If you have an IRA and in some years you made non-deductible (you could not deduct them in your annual personal taxes) contributions to it, then they should be accounted for annually by using Form 8606. If you fail to account the cumulative non-deductible contributions (also known as basis) then the IRS may treat all contributions as deductible and the distributions (withdrawals) as fully taxable at your ordinary income tax rate when you go to withdrawal money from them.

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