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about using turbotax: re RMD's

Forum|Forum|3 years ago
January 24, 2023
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Why does entering 12/31/2022 IRA balance affect my 2022 taxes when RMD for 2022 is based on 12/31/2021 amount?

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Best answer by dmertz

The IRA year-end balance affects the taxable amount of the IRA distribution when you have basis in nondeductible traditional IRA contributions. Under these circumstances the calculation of the taxable amount is done on Form 8606 Part I. Without the year-end balance entered, TurboTax assumes that your year-end balance is zero, and the calculation on Form 8606 results in an incorrect higher amount of the distribution being nontaxable.

TurboTax also separately asks for your year-end balance if you have made an excess contribution as DaveF1006 suggests is a possibility. The excess-contribution penalty is 6% of excess contribution or 6% of your year-end balance whichever is less.

DaveF1006

It depends. To clarify, did you make a contribution to your IRA during the year with earned income dollars?

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F

flutesusheAuthor

no, I did not make any contributions with earned income dollars

D

dmertzAnswer

Employee

The IRA year-end balance affects the taxable amount of the IRA distribution when you have basis in nondeductible traditional IRA contributions. Under these circumstances the calculation of the taxable amount is done on Form 8606 Part I. Without the year-end balance entered, TurboTax assumes that your year-end balance is zero, and the calculation on Form 8606 results in an incorrect higher amount of the distribution being nontaxable.

TurboTax also separately asks for your year-end balance if you have made an excess contribution as DaveF1006 suggests is a possibility. The excess-contribution penalty is 6% of excess contribution or 6% of your year-end balance whichever is less.