J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

8.9 Partially Tax-Free Traditional IRA Distributions Allocable to Nondeductible Contributions

If you ever made a nondeductible contribution to a traditional IRA, you must file Form 8606 to report a 2012 distribution from any of your traditional IRAs, even if the distribution is from an IRA to which only nondeductible contributions were made. All of your traditional IRAs are treated as one contract. If you receive distributions from more than one IRA in the same year, they are combined for reporting purposes on Form 8606. When you withdraw an amount from any traditional IRA during a taxable year and you previously made both deductible and nondeductible IRA contributions, the part of your withdrawal that is allocable to your nondeductible contributions is tax-free; any balance is taxable. You may not claim that you are withdrawing only your tax-free contributions, even if your withdrawal is less than your nondeductible contributions. The six steps below reflect the IRS method used on Form 8606 to figure the nontaxable and taxable portions of the IRA distributions.

The rule requiring you to combine nondeductible and deductible IRAs when making IRA withdrawals does not apply to withdrawals from a Roth IRA. A Roth IRA is treated separately. After a five-year period, withdrawals after age 59½ from a Roth IRA are completely tax-free (8.23).

A bank or other payer of a distribution from a traditional IRA will not indicate on Form 1099-R whether any part of a distribution is a tax-free return ...