I think I'm following these instructions as closely as possible, but it's still treating my distributions as mostly taxable. However, I noticed that it seems to depend on what I enter for the current value of our Traditional IRA accounts as of 12/31/22. I was struggling with the entries for my conversion, so I tried it for my wife's, and noticed that the tax due amounts did not update until I entered the IRA value. When I have the actual values entered, nearly all of the distribution amounts show as taxable when I check lines 4a and 4b. But just to see what would happen, I entered $1,000 for our account values, and only a few hundred dollars out of $19,000 was shown as taxable on 4b.
Why would this make a difference? I'm trying to get this straight because I think my initial problem was that our 1099-Rs have the 7 code in box 7, rather than a 2. We are under 59-1/2 and TurboTax was telling me that I should check with our IRA custodian because it's very unusual to have the 7 code if we're under 59-1/2. So I've been using a 2 in my entries in TurboTax.
Part of this total was 2021 contributions made in early 2022 ($6K and $7K) and another $6K made in 2022 for 2022. I did not include the 2021 contributions in last year's taxes but I did update our basis amounts and will file the 8606 forms. So I think I have all these entries correct according to the guide.
