I've never quite understood what the purpose of a contribution form was for a post-tax contribution to a Roth IRA. I'm not getting a deduction for it or anything, after all. Is there any consequence if a person were to forget to document a Roth contribution in income tax filings?

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    Note that you're not allowed to contribute to a Roth IRA (or only allowed to contribute a partial amount) if you make over a certain income limit. It may be more about that. – user296 Jan 25 '11 at 0:22
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    I guess the other thing is, you're not allowed to contribute more than you earned by working. – jldugger Jan 25 '11 at 3:39

From the IRS instructions for Form 8606:

Penalty for Not Filing

If you are required to file Form 8606 to report a nondeductible contribution to a traditional IRA for 2010, but do not do so, you must pay a $50 penalty, unless you can show reasonable cause.

Overstatement Penalty

If you overstate your nondeductible contributions, you must pay a $100 penalty, unless you can show reasonable cause.

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  • All I have is a form 5498 documenting the contributions I've made. It doesn't look like 8606 is necessary then? – jldugger Jan 26 '11 at 2:34

If you decide to make any withdrawals prior to age 59-1/2, you first withdraw deposits, no tax due. Beyond that, there's an early withdrawal penalty, 10% tax on that amount. The form is the way to track cumulative deposits.

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From my personal experience I did not have to show any documentation for a Roth contribution, since its being done with post tax dollars. And once the money is in the Roth it anyways completely sheltered from future taxes. I file taxes using Turbo Tax and I have a Roth account since the last few years.

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