Question

Jump in tax after entering retirement account value

Forum|Forum|5 years ago
July 11, 2020
1 reply
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Hello...

I had just about completed the RMD portion of my taxes, and the final step seemed to be to enter the total value of my retirement accounts. I did, and suddenly noticed on both my state and federal tax a large jump in the taxes owed!? I took all the necessary distributions I was require to do. Why the big jump right after entering my total account information?

D

dmertz

Employee

It seems that you have entered a Form 1099-R reporting a distribution from a traditional IRA and you have basis in nondeductible traditional IRA contributions. If that's the case, TurboTax cannot properly prepare Form 8606 to calculate the taxable amount of the distribution until you enter the year-end value of your traditional IRAs. Until then TurboTax assumes a $0 year-end value and calculates an incorrectly low taxable amount for the distribution. Entering the year-end value allows TurboTax to correct the previously incorrect calculation, increasing the taxable amount to the correct, higher amount.