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2020 RMD: Meet IRS Form 8606

By Julie Jason, originally posted on Forbes.com:

If you haven’t filed your 2020 tax return, are you still dealing with complexities created when RMDs (required minimum distributions) were waived for 2020? RMDs are mandated distributions (withdrawals) from tax-deferred accounts, such as IRAs. 

Doing your taxes for 2020 can be confusing, given that RMDs were suspended for 2020 in March by the CARES (Coronavirus Aid, Relief, and Economic Security) Act. For those who took their RMDs before then, the IRS issued IRS Notice 2020-51 in June 2020, allowing RMDs to be reversed (rolled over) by Aug. 31, 2020.  

Reader Question

A reader who took advantage of the RMD relief posed an important question about how to handle tax reporting. 

B.M. wrote: 

“Last year (2020) my wife and I each got one RMD before being able to cancel due to CARES Act. Each of us had both Fed and CT tax taken out.

“Before Aug. 31, 2020, we deposited each of our RMDs into existing Roth IRAs.

“Since I do our taxes (old fashion, paper) could you go over how to fill out Form 8606 for our case?”

General Rules vs. Specific Advice

Keeping in mind that only your tax adviser can give you answers to specific questions you might have on how to file your tax forms, let’s go through some general rules for filing Form 8606. The tricky part is whether the taxpayer has “basis” in the IRA from after-tax contributions (“nondeductible contributions).”   

Can You Convert an RMD to a Roth? 

You may have noticed from B.M.’s letter that he and his wife rolled over their RMD withdrawals from traditional IRAs into Roth IRAs. How could that be, as RMDs cannot be converted into Roth IRAs? 

Here is the reason: In 2020, RMDs were suspended, thanks to the CARES Act. IRS News Release 2020-187, issued Aug. 24, 2020, stated: “Since the RMD rule is suspended, RMDs taken in 2020 are considered eligible for rollover.” That opened the door to conversions from traditional IRAs to Roth IRAs, but just for 2020. 

Traditional IRAs vs. Roth IRAs 

Traditional IRAs are tax-deferred, which means no taxes are due until you withdraw money from the IRA. Until then, no income or capital gains tax obligations are triggered on the investments held in the IRA. Income taxes are due when there is a withdrawal, whether you are following RMD rules or withdrawing funds for any other reason. In either case, the withdrawal is considered a taxable event. In certain cases, such as an early withdrawal, a tax penalty may also be payable to the Treasury. 

The Roth IRA owner has no RMD obligations. Withdrawals don’t trigger income taxes, unless the withdrawals are made too soon after the creation of the Roth. You can find more information in IRS Publication 590-B.

Door Is Closed on Using RMDs to Convert to Roth IRAs 

RMD suspensions ended with the coming of 2021. Now, we go back to the old rule that you cannot use an RMD to roll over into another tax-deferred account or to fund a Roth “conversion” (moving money from a traditional IRA to a Roth IRA). 

But, going forward, there is nothing stopping you from using additional IRA withdrawals (in excess of RMDs) to convert to a Roth. For example, under current rules, if you withdraw, say, $20,000 from your traditional IRA and your RMD is $15,000 of that amount, $5,000 could be converted to a Roth. 

Generally, you will be taxed on the full $20,000. Yes, “generally.” There are exceptions on how much of the $20,000 is taxable as income, which has to do with the IRA’s “basis” created by nondeductible contributions. That’s where Form 8606 comes into play.  

What Is Form 8606?

IRS Form 8606 has to be filed with the tax return in certain instances involving IRAs: when you make a nondeductible contribution, when you withdraw from a Roth IRA or a traditional IRA to which you made nondeductible contributions, when you convert from a traditional IRA to a Roth IRA, or when you withdraw money from a Roth IRA. 

Nondeductible Contributions. Form 8606 is required to be filed when you make nondeductible (after-tax) contributions to a traditional IRA, hence the name of the form, “Nondeductible IRAs.” (Note: Taxpayers who are covered by a retirement plan at work and have incomes that exceed certain levels will not be able to make deductible contributions. See IRA FAQs.) 

Withdrawals (“Distributions”). Use Form 8606 when you withdraw money from a traditional IRA, SEP or SIMPLE IRA to which you made nondeductible contributions in the past. The form is also required when you take money out of a Roth IRA (note that contributions to a Roth are nondeductible). 

Conversions. File Form 8606 when you convert a traditional IRA to a Roth IRA. This will involve Part II: “2020 Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs.”

Filling Out Form 8606

If you and your spouse both converted to Roths in 2020, as in B.M.’s case, each of you will need to file a separate Form 8606. 

The sections of the form that need to be filled out will depend on whether the taxpayer made nondeductible contributions to traditional IRAs in 2020 or in a previous year.   

Nondeductible contributions create basis in an IRA. Form 8606 instructions define basis as “the total of all your nondeductible contributions and nontaxable amounts included in rollovers made to these IRAs [traditional, SEP, and SIMPLE IRAs] minus the total of all your nontaxable distributions, adjusted if necessary.”  The reason for tracking basis has to do with figuring out how much of an IRA withdrawal will be subject to tax.  

Part I: No Nondeductible Contributions; No Basis  

Taxpayers who made no nondeductible contributions can skip Part I of Form 8606. 

Part I: Nondeductible Contributions? Basis 

If you made contributions that were not deductible, you’ll need to fill out Part I to figure your total “basis” for 2020 and earlier years. This is the most difficult part of the form to complete, as it takes time to gather information about basis. However, keep in mind that taxpayers normally fill out this form each year as contributions are made.  

Part II: Roth Conversion

If there were no nondeductible contributions reported in Part I, the taxpayer would enter the net amount of the conversion from a traditional IRA to a Roth IRA in 2020 on line 16 in Part II of Form 8606. 

Part III: Distributions From Roth IRAs

There is a third section to Form 8606 for distributions from Roth IRAs. 


Be sure to present your questions on your own personal situation to your tax adviser before even thinking of taking any action. Tax advice needs to be tailored to your particular situation.


If you have general questions on RMDs, write to me at forbes@juliejason.com. Include your city and state, and mention that you are a forbes.com reader. 

To read Julie Jason's books, go to: https://juliejason.com/books/julies-books.