What exactly is the value of a Roth IRA?

Forum|Forum|6 years ago
June 5, 2019
3 replies
0 views

Is it my total annual contribution? Or lifetime contribution? I need clarification

TurboTax Deluxe Online

Best answer by fanfare

The value is what it is currently worth to cash out completely, not counting any liquidation fees or penalties.

for tax purposes what it is worth on a particular date such as the last day of the calendar year.

fanfareAnswer

Employee

The value is what it is currently worth to cash out completely, not counting any liquidation fees or penalties.

for tax purposes what it is worth on a particular date such as the last day of the calendar year.

km13818

Why does entering this value affect my tax return? I thought Roth IRAs should have no impact on my taxes

JulieS

Yes, it is true that Roth distributions are generally tax free, they do sometimes affect your taxes.

If you take money out before you are 59-1/2 years old, you have to show that the distribution is a qualified Roth distribution, and therefore tax free with no penalty.

Contributions to Roth accounts are limited, so year end values are a way of the IRS monitoring excess contributions.

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taxpreparer1000

I'm still baffled as to why TurboTax is asking for the first time ever the value of my husband's Roth IRA. He made no excess contributions - in fact he made less than the maximum contribution amount. He took nothing out of the Roth IRA. He's not old enough for mandatory distributions.

In fact, for the first time ever, TurboTax shows us owing MORE tax based on Roth IRA contributions. So we're being taxed doubly??

Does anyone understand this?

Thanks!!!

taxpreparer1000

Never mind. I figured out the problem!

ReneeM7122

It depends. Without more information about your situation, it sounds like TurboTax might be asking you for information to complete Form 8606 (Nondeductible IRAs).

We'll automatically generate and fill out Form 8606 if you reported any of these on your tax return:

Nondeductible contributions made to a traditional IRA
Distributions from a traditional, SEP or SIMPLE IRA that had nondeductible contributions (excluding rollovers, conversions, recharacterizations, qualified charitable distributions, one-time distribution to fund an HSA, or return of certain contributions)
Conversions from a traditional, SEP, or SIMPLE IRA to a Roth IRA
Distributions from a Roth IRA (other than rollovers, recharacterizations, or a return of certain contributions)

To trigger the 8606 in TurboTax

Open your return if it isn't already open.
Inside TurboTax, search for this exact phrase: 8606 nondeductible ira contributions
Select the Jump to link in the search results.
Proceed through the IRA section, answering questions as you go.
When you reach the screen Any nondeductible contributions to [taxpayer's] IRA? answer Yes, then continue. We'll generate and fill out the 8606 behind the scenes.

If this doesn't answer your question, please come back with more details about your Roth IRA and the documents that you have received to use in preparing your return.

@DIY1234