Professional reviewing IRA records and calculations for accurate Form 8606 reporting

Form 8606 in 2026: The Simple Recordkeeping Step That Can Prevent Double Taxation

Most investors do not run into trouble because they chose the wrong IRA. They run into trouble because a small reporting detail gets missed and later the IRS treats after tax dollars as if they were pre tax.

IRS Form 8606 is the mechanism used to track after tax money in IRAs – often called IRA basis – and to determine how much of an IRA withdrawal or Roth conversion should be taxable versus tax free.

When Form 8606 is missed, the risk is straightforward: you can end up paying tax twice on the same dollars.

Who Should Care

This matters if any of the following apply:

  • You have ever made a non deductible contribution to a Traditional IRA
  • You use the backdoor Roth strategy, or you may in the future
  • You do Roth conversions from a Traditional IRA, SEP IRA, or SIMPLE IRA
  • You take IRA withdrawals and you have after tax basis from prior years
  • You rolled money from a workplace plan into an IRA and any portion was after tax

If none of these apply and you have never had after tax basis in an IRA, Form 8606 is usually not part of your return.

Why Non Deductible Traditional IRA Contributions Happen

A non deductible IRA contribution often happens when someone is allowed to contribute to a Traditional IRA, but is not allowed to deduct that contribution because of income limits tied to workplace retirement plan coverage.

For tax year 2026, the IRS increased the IRA contribution limit to $7,500 and raised the age 50+ catch up contribution to $1,100, for a total of $8,600 if you are 50 or older.

Deductibility is where higher earners get surprised. If you or your spouse is covered by a retirement plan at work, the Traditional IRA deduction phases out based on modified adjusted gross income.

According to IRS guidance on IRA deduction limits, the 2026 phase-out ranges when the taxpayer is covered by a workplace retirement plan are:

  • Single: $81,000 to $91,000
  • Married filing jointly, contributor covered: $129,000 to $149,000
  • Married filing jointly, contributor not covered but spouse covered: $242,000 to $252,000
  • Married filing separately, covered: $0 to $10,000

Above the top of your range, you may still be allowed to contribute, but the contribution is non deductible. That creates after tax IRA basis that must be tracked.

This also overlaps with backdoor Roth planning because Roth IRA contributions phase out at higher income levels. For 2026, Roth IRA contributions phase out between $153,000 and $168,000 for single and head of household filers, and between $242,000 and $252,000 for married filing jointly.

What Form 8606 Does in Plain English

Form 8606 is your proof to the IRS that you already paid tax on certain IRA dollars.

According to the Form 8606 instructions, it is used to report non deductible contributions to Traditional IRAs, distributions from Traditional, SEP, or SIMPLE IRAs if you have ever made non deductible contributions, and conversions from Traditional, SEP, or SIMPLE IRAs to Roth IRAs.

In practical terms, the form keeps a running total of your after tax basis so it can be applied correctly when you withdraw or convert IRA money.

The Key Point Most People Miss

Many taxpayers think Form 8606 only matters in the year they made the non deductible contribution.

In practice, it can matter again in later years even if you made no new non deductible contribution, because the form is also used when you have basis and you do a Roth conversion or take distributions from an IRA. This is explained in the IRS Form 8606 instructions.

That is why this is ultimately a recordkeeping issue. Once after tax IRA basis exists, the paperwork needs continuity so the tax treatment stays correct over time.

Why Consistency Helps if You Ever Change CPAs

A new tax preparer will often start by reviewing last year’s return. If the most recent return does not clearly show the ongoing IRA basis story, the history can be overlooked.

Even if you never change CPAs, this can still happen in a quiet year when no non deductible contribution was made, but a conversion or distribution occurred or basis still existed.

Best practice is simple: make sure Form 8606 is filed in every year it is required, and keep copies of your most recent Form 8606 along with prior year copies so the history does not get lost.

Does This Apply to a 401(k)

Not directly. Form 8606 is an IRA form. It does not report 401(k) contributions or Roth 401(k) contributions.

Where a 401(k) can become relevant is during rollovers. If after tax dollars from an employer plan ever end up in a Traditional IRA, that can create IRA basis that needs to be tracked going forward. Keep the plan’s distribution statement and any breakdown showing pre tax, Roth, and after tax amounts so your tax preparer has clean documentation.

What to Do, Practically

  • Check prior tax returns for Form 8606 if you have ever made a non deductible IRA contribution or used a backdoor Roth approach.
  • If you have done Roth conversions, confirm Form 8606 was included in the conversion years.
  • If you believe you have basis but cannot find the filing history, do not guess. Basis can often be reconstructed, but it should be done carefully with your CPA.

Questions to Ask Your CPA

  • Do I have any after tax IRA basis in any Traditional, SEP, or SIMPLE IRA?
  • Was Form 8606 filed in every year it was required, including Roth conversion years?
  • If not, what is the cleanest way to reconstruct IRA basis from prior records?

How BlackPoint Helps

BlackPoint Capital Partners does not prepare tax returns. We do coordinate tax sensitive planning. When a client is using backdoor Roth contributions, doing Roth conversions, or has after tax IRA basis, we help ensure the investment plan and the tax reporting stay aligned so a simple recordkeeping issue does not turn into unnecessary taxes later.

Some of the content of this communication was provided by third parties of BlackPoint Capital Partners.  We have not verified the information contained herein, but we believe the content is reliable.  None of this content should be construed as legal, accounting or tax advice.  Tax laws are complex and often have highly-individualized requirements, you should seek the advice of a competent tax professional if you have specific tax questions.

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