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TurboTax considering all ROTH conversions to use non-deductable basis, even if needs to be fully taxed.

Forum|Forum|6 years ago
March 9, 2020
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We have made some purposeful ROTH conversions from traditional IRA accounts that are fully taxable and have no basis. However, my spouse and I have other IRA accounts that have a basis that we want to report and carry forward in a FORM 8606.

TurboTax is forcing that the basis we have be allocated to the ROTH conversions, thus reducing our tax liability. This is not what is going on with our ROTH conversions, as we have little income in 2019 and are purposely doing conversions from accounts that *are* taxable.

The only way we can force TurboTax to leave this alone is to override the 8606 form. And now it claims we cannot file electronically.

Does anyone have a clue as to how to specify that this ROTH conversion isn't to use the reported basis??

Thank you.

Best answer by macuser_22

Then you probably did not enter the total 2019 year end value of all Traditional, SEP and SIMPLE IRA accounts when asked for it. Right after the screen that asks for past years basis (that should auto fill if carried from last year).

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

Here are a couple of screenshots form past years (the dates and not current but the screens are the same)

macuser_22

Employee

You cannot separate the non-deductible basis between accounts.

You can NEVER withdraw ONLY the nondeductible part - it must be prorated over the entire value of ALL Traditional IRA accounts which include SEP and SIMPLE IRA's. (For tax purposes you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together).

ANY distribution from ANY Traditional, SEP or SIMPLE IRA whether simply withdrawn or converted to a Roth must always pro-rate between that distribution and the years end total value of all IRA accounts.

**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.**

george_sonomaAuthor

If this is the case, then TurboxTax isn't treating it correctly either. It isn't pro-rating the basis. It's using 100% of it.

Are you thinking RMDs? These aren't RMDs, BTW...

macuser_22Answer

Employee

Then you probably did not enter the total 2019 year end value of all Traditional, SEP and SIMPLE IRA accounts when asked for it. Right after the screen that asks for past years basis (that should auto fill if carried from last year).

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

Here are a couple of screenshots form past years (the dates and not current but the screens are the same)

**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.**