If you used the IRA Deduction Worksheet in the Form 1040 or 1040A instructions, subtract line 12 (line 10 for Form 1040A) of the worksheet (or the amount you chose to deduct on Form 1040, line 32, or Form 1040A, line 17, if less) from the smaller of line 10 or line 11 (line 8 or line 9 for Form 1040A) of the worksheet. Enter the result on line 1 of Form 8606. You cannot deduct the amount included on line 1.

If you used the worksheet Figuring Your Reduced IRA Deduction for 2009 in Pub. 590, enter on line 1 of Form 8606 any nondeductible contributions from the appropriate lines of that worksheet.

If you did not have any deductible contributions, you can make nondeductible contributions up to your contribution limit. Enter on line 1 of Form 8606 your nondeductible contributions.

Include on line 1 any repayment of a qualified reservist distribution. Also, include any repayment of a qualified hurricane, disaster recovery assistance, or recovery assistance distribution that is attributable to previously nondeductible contributions.

Do not include on line 1 contributions that you had returned to you with the related earnings (or less any loss). See page 4.

If this is the first year you are required to file Form 8606, enter -0-. Otherwise, use the chart below to find the amount to enter on line 2.

However, you may need to enter an amount other than -0- or adjust the amount from the chart if your basis changed because of any of the following.

If you made contributions to traditional IRAs for 2009 in 2009 and 2010 and you have both deductible and nondeductible contributions, you can choose to treat the contributions made in 2009 first as nondeductible contributions and then as deductible contributions, or vice versa. But the amount on line 4 cannot be less than the excess, if any, of the amount on line 1 over the contributions you actually made in 2009.

Example. You made contributions for 2009 of $2,000 in May 2009 and $2,000 in January 2010, of which $3,000 are deductible and $1,000 are nondeductible. You choose $1,000 of your contribution in 2009 to be nondeductible. You enter the $1,000 on line 1, but not line 4, and it becomes part of your basis for 2009.

Although the contributions to traditional IRAs for 2009 that you made from January 1, 2010, through April 15, 2010, can be treated as nondeductible, they are not included in figuring the nontaxable part of any distributions you received in 2009.

Enter the total value of all your traditional, SEP, and SIMPLE IRAs as of December 31, 2009, plus any outstanding rollovers. A statement should be sent to you by January 31, 2010, showing the value of each IRA on December 31, 2009. However, if you recharacterized any amounts, enter on line 6 the total value taking into account all recharacterizations, including recharacterizations made after December 31, 2009.

For line 6, a rollover is a tax-free distribution from one traditional, SEP, or SIMPLE IRA that is contributed to another traditional, SEP, or SIMPLE IRA. The rollover must be completed within 60 days of receiving the distribution from the first IRA. An outstanding rollover is any amount distributed in 2009 after November 1, 2009, that was rolled over in 2010, but within the 60-day rollover period.

The IRS may waive the 60-day requirement if failing to waive it would be against equity or good conscience, such as situations where a casualty, disaster, or other events beyond your reasonable control prevented you from meeting the 60-day requirement. Also, the 60-day period may be extended if you had a frozen deposit. See Pub. 590 for details.

If you received a distribution in 2009 from a traditional, SEP, or SIMPLE IRA, and you also made contributions for 2009 to a traditional IRA that may not be fully deductible because of the income limits, you must make a special computation before completing the rest of this form. For details, including how to complete Form 8606, see Are Distributions Taxable? in chapter 1 of Pub. 590.

Do not include any of the following on line 7.

If, in 2009, you converted any amounts from traditional, SEP, or SIMPLE IRAs to a Roth IRA, enter on line 8 the net amount you converted. To figure that amount, subtract from the total amount converted in 2009 any portion that you recharacterized back to traditional, SEP, or SIMPLE IRAs in 2009 or 2010 (see Recharacterizations that begins on page 3). Do not take into account related earnings that were transferred with the recharacterized amount or any loss that occurred while the amount was in the Roth IRA. See item 1 under Reporting recharacterizations on
page 3 for details.

If all your distributions are qualified disaster recovery assistance distributions, enter the amount from line 15a on line 15b. If you have distributions unrelated to the Midwestern severe storms, tornadoes, or flooding, as well as qualified disaster recovery assistance distributions, you will need to multiply the amount on line 15a by a fraction. The numerator of the fraction is your total qualified disaster recovery assistance distributions. The denominator of the fraction is the amount from Form 8606, line 7. See the example below.

If you were under age 59½ at the time you received distributions from your traditional, SEP, or SIMPLE IRA, there generally is an additional 10% tax on the portion of the distribution that is included in income (25% for a distribution from a SIMPLE IRA during the first 2 years). See the Instructions for Form 1040, line 58, or the Instructions for Form 1040NR, line 54.

Limit on number of conversions.   If you converted an amount from a traditional, SEP, or SIMPLE IRA to a Roth IRA in 2009 and then recharacterized the amount back to a traditional, SEP, or SIMPLE IRA, you cannot reconvert that amount until the later of January 1, 2010, or 30 days after the recharacterization. See Pub. 590 for details.

If you did not complete line 8, see the instructions for that line. Then, enter on line 16 the amount you would have entered on line 8 had you completed it.

If you did not complete line 11, enter on line 17 the amount from line 2 (or the amount you would have entered on line 2 if you had completed that line) plus any contributions included on line 1 that you made before the conversion.

Do not include on line 19 any of the following.

If, after considering the items above, you do not have an amount to enter on line 19, do not complete Part III; your Roth IRA distribution(s) is not taxable. Instead, include your total Roth IRA distribution(s) on Form 1040, line 15a; Form 1040A, line 11a; or Form 1040NR, line 16a.

If you had a qualified first-time homebuyer distribution from your Roth IRA and you made a contribution (including a conversion) to a Roth IRA for 2004 or an earlier year, enter the amount of your qualified expenses on line 20, but do not enter more than $10,000.

Figure the amount to enter on line 22 as follows.

Generally, there is an additional 10% tax on 2009 distributions from a Roth IRA that are shown on line 23. The additional tax is figured on Form 5329, Part I. See the instructions for Form 5329, line 1, for details and exceptions.

Figure the amount to enter on line 24 as follows.

If all your distributions are qualified disaster recovery assistance distributions, enter the amount from line 25a on line 25b. If you have distributions unrelated to the Midwestern severe storms, tornadoes, or flooding, as well as qualified disaster recovery assistance distributions, you will need to multiply the amount on line 25a by a fraction. The numerator of the fraction is your total qualified disaster recovery assistance distributions. The denominator of the fraction is the amount from Form 8606, line 21. See the example below.