[10823]
March 22, 1999
TO: PENSION MEMBERS No. 17-99
PENSION OPERATIONS ADVISORY COMMITTEE No. 20-99
RE: IRS RELEASES SUPPLEMENTAL INSTRUCTIONS FOR 1998 FORM 8606
______________________________________________________________________________
The Internal Revenue Service has released Announcement 99-18, which provides supplemental
instructions for the completion of 1998 Form 8606, Nondeductible IRAs. Specifically it clarifies the
following: (1) the proper reporting for Roth IRA conversions and recharacterizations; (2) the proper
computation of the 10% additional tax for early distributions from Roth conversions and subsequent
withdrawals from Roth IRA accounts; and (3) the computation of modified AGI for purposes of Roth
IRAs on page 2 and the Education IRA Contribution worksheet on page 3 in the separate instructions
for Form 8606.
With respect to reporting of Roth IRA conversions and recharacterizations, Announcement 99-
18 provides an example of a Roth IRA contribution, a Roth IRA conversion, recharacterization and
reconversion. Announcement 99-18 provides specific guidance with respect to how taxpayers should
report the transactions on Form 8606, Part II, lines 14-17 and on Form 1040.
Announcement 99-18 revises the section regarding the 10% additional penalty as follows: “Note:
If you receive a Roth IRA distribution before reaching age 59 1/2, you may be subject to an additional
10% tax. See Form 5329. Include on line 1 of Form 5329 the smaller of the amount on line 20 or the
sum of the amounts on lines 16 and 25.”
With respect to computation of modified AGI for purposes of Roth IRAs, page 2 of the Form
8606 instructions, item 1 under “Modified AGI for purposes of Roth IRAs” should include a reference
to Form 1040A, line 10b. The Education IRA Contribution worksheet is revised as follows: line 2 of the
worksheet on page 3 of the instructions should read “Enter $150,000 if married filing jointly; or $95,000
for all other filers.” The referenced amount for married filing separately should be deleted.
A copy of Announcement 99-18 is attached.
Kathryn A. Ricard
Assistant Counsel
Attachment
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