Question

8606 line 10 vs worksheet (Figuring the Taxable Part of Your IRA Distribution) line 7

Forum|Forum|5 years ago
September 19, 2020
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IRS form 8606, line 10 calculates fraction based on Total IRA contribution for the tax year PLUS basis in traditional IRA as of end of the previous year MINUS IRA contribution for the tax year made from January 1st till April 15th of the following year.

While, the Worksheet 1-1 (Figuring the Taxable Part of Your IRA Distribution) from IRS publication 590-B, line 7 (https://www.irs.gov/pub/irs-pdf/p590b.pdf, on page 15), calculates the same fraction based only on Total IRA contribution for the tax year PLUS basis in traditional IRA as of end of the previous year. (it does not subtract IRA contribution for the tax year made from January 1st till April 15th of the following year).

Which calculations are correct? If I made, IRA contribution for the tax year between January 1st and April 15th of the following year, then worksheet would produce higher taxes than form 8606. TurboTax seems to be using the worksheet calculation. I think the form 8606 calculations are correct - if I made part of IRA contributions between January 1st and April 15th, then how could I have used those contributions in distribution from IRA in the tax year?

Am I missing something or not understanding it correctly?

macuser_22

Employee

If worksheet 1-1 is required then the TurboTax 8606 form will have a * (asterisk) next to line 15 and the "Taxable IRA Distribution Smart Worksheet) will be used instead of the 8606 lines 6-15 which is the same as Pub 590B worksheet 1-1.

Pub 590B says:

Contribution and distribution in the same year. If you
received a distribution in 2019 from a traditional IRA and
you also made contributions to a traditional IRA for 2019
that may not be fully deductible because of the income
limits, you can use Worksheet 1-1 to figure how much of
your 2019 IRA distribution is tax free and how much is taxable.

Worksheet 1-1.

Use only if you made contributions to a traditional IRA for 2019 that may not be fully deductible and have to figure the
taxable part of your 2019 distributions to determine your modified AGI. See Limit if Covered by Employer Plan in
chapter 1 of Pub. 590-A

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

Y

yfegadeAuthor

Thanks.

On form 8606, I did not see any specific mention that if certain conditions apply then don't user lines 6-12 on form 8606, but use the worksheet instead.

Where does IRS provides guidelines as to when to use the worksheet to do calculations and when to use form 8606 to make calculations?

macuser_22

Employee

@yfegade wrote:

Where does IRS provides guidelines as to when to use the worksheet to do calculations and when to use form 8606 to make calculations?

In pub 590B that you posted the link to.

The 590B worksheet 1-1 treats non-deductible contribution make in 2020 *for* 2019 as if they had been made in 2019. I will note that seems to contradict the 8606 instructions, but it is the IRS worksheet, and has been like that for years.

User @dmertz have you ever found a reason why the IRS 590B worksheet 1-1 seems to do the opposite of the 8606 line 4 statement that says:

Although the contributions to traditional IRAs for 2019 that you made from January 1, 2020, through April 15, 2020, can be treated as nondeductible, they aren’t included in figuring the nontaxable part of any distributions you received in 2019.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**