Yes! You can use AI to fill out Form 8606, Nondeductible IRAs

Many people expect their IRA provider to send them a completed Form 8606, similar to a 1099-R. However, the taxpayer is responsible for completing and filing Form 8606 to report non-deductible contributions, Roth conversions, and distributions of after-tax amounts. Failing to file can result in double taxation on withdrawals and potential penalties. To avoid this, remember to obtain and file Form 8606 with your tax return yourself whenever you make these types of transactions.

A frequent point of confusion is the deadline for making an IRA contribution for the previous tax year. Taxpayers often assume the deadline is December 31, but it is actually the April tax filing deadline of the current year. Missing this deadline means losing a valuable opportunity to contribute for the prior year, which can impact tax deductions and retirement savings growth. Always remember you have until Tax Day to fund the previous year's IRA.

The deadline for your first Minimum Required Distribution (MRD) is April 1 of the year after you reach the required age, but for all subsequent years, it is December 31. This can cause a person to take their first MRD in March and forget they must take their second MRD by December 31 of that same year. Missing an MRD deadline results in a substantial tax penalty, often 25-50% of the amount that should have been withdrawn. Set calendar reminders for both deadlines to avoid this costly error.

The Form 5498 provided by your institution does not differentiate between deductible and non-deductible contributions. It is the taxpayer's sole responsibility to track this 'basis' on Form 8606 each year a non-deductible contribution is made. If you fail to track your basis, you will pay taxes on that money again when you withdraw it, effectively erasing its tax-free status. Using a tool like Instafill.ai can help you consistently track and apply your basis across tax years, preventing over-taxation.

Unlike contributions, which have a deadline in April of the following year, Roth conversions must be fully completed by December 31 to count for the current tax year. People often mistakenly believe they have until the tax filing deadline, causing them to miss the window and unintentionally push the taxable event into the next year. This can disrupt tax planning, so ensure any funds for conversion are moved to the Roth account before the end of the calendar year.

Form 1099-R uses distribution codes in Box 7 to explain the nature of a withdrawal, such as an early distribution, a rollover, or a normal distribution. Taxpayers often overlook these codes, leading to incorrect reporting on their tax returns and potentially triggering unnecessary taxes or penalties. Always verify the code on your 1099-R to ensure you are reporting the distribution correctly. AI-powered tools like Instafill.ai can automatically interpret these codes and ensure the data is entered correctly on your tax forms.

A Roth conversion is a reportable tax event that must be documented on Form 8606, which calculates the taxable portion of the conversion. If you convert funds from a traditional IRA containing non-deductible basis and fail to file this form, the IRS may assume the entire amount is taxable. This results in paying more tax than necessary. Always file Form 8606 to accurately report the conversion and your cost basis.

Taxpayers sometimes delay filing their taxes because they haven't received Form 5498, which reports IRA contributions. However, this form is primarily for your records and is not required to be submitted with your tax return; you should already have records of your own contributions. Since providers have until February 15 or later to send it, waiting can cause a last-minute rush or even lead to late filing. You can file your return using your own contribution records without having the form in hand.

This document is an informational guide, not an actual tax form that can be filled out. A common error is for users to try and type directly into such a document, leading to frustration when they find it is a non-interactive, 'flat' PDF. To complete your tax obligations, you must obtain the official, fillable versions of forms like Form 8606 from the IRS website. For flat PDFs that are meant to be filled, tools like Instafill.ai can convert them into fillable versions, saving time and effort.