Get your taxes done using TurboTax

syoung123 · ‎February 12, 2024

Hello, thank you again for the additional information. I re-input the two 1099Rs to TurboTax as a test to see how it calculates and generate the Form 8606 (without other data, just two 1099Rs). I appreciate if you could review the numbers to see if I did it correctly. See below for the input and result.:

First 1099R - for partial 401K distribution to a traditional IRA

Box 1 gross distribution - $200,000 (out of total amount $250M in 401K)

Box 2a taxable amount - blank

Box 5 employee contributions (portion of my after-tax contribution?) - $400

Box 7 distribution code - G with IRA/SEP box unchecked

Second 1099R - for partial traditional IRA (different IRA account from above) rollover to Roth – I also did a partial conversion for tax year 2022 which was the first roll-over year.

Year 2023 IRA distribution - $60,000 (To Roth - $57,500, Tax Withheld - $2,500)

Box 1 - $60,000

Box 2a taxable amount - $60,000

Box 2b taxable amount not determined – “checked”

Box 4 FIT - $2,000

Box 7 - code “7” with IRA/SEP “checked”

Box 14 state tax - $500

The second 1099R is related to a 401K conversion (this is a different 401K from the one converted in 2023 per the first 1099R) to the traditional IRA that I did in 2022. I also did a partial conversion in 2022 to Roth – the initial rollover amount to the traditional IRA was $300,000, and I moved $15,000, with $14,000 to Roth, $1,000 to FIT and state tax. A 2022 Form 8606 was generated, the only numbers that showed on the Form 8606 wee $14,000 Roth conversion on line 16 and 18 in Part II. All the lines on Part I are blank.

For 2022 -

Form 8606, Line 16 - $14,000, Line 17 – $0, Line 18 - $14,000

1040 4a and 4b (rollover) - $15,000 ($14,000 to Roth, $1,000 to taxes withheld)

2022 rollover IRA – 12/31/2023 balance per broker statement - $248,000 ($300,000 initial balance minus $15,000 distribution/conversion to Roth in 2022, minus $60,000 distribution/conversion to Roth in 2023, plus $23,000 investment gains through end of 2023)

2023 TurboTax Input

First 1099R - partial 401K distribution to a traditional IRA in 2023

Input 1099R with data shown above for the first 1099R, including the $400 in Box 5
Screen input – select “no this money didn’t rollover to a Roth 401K account”
“no this money wasn’t rolled over to a Roth IRA account”
“not public safety officer”, “not qualified disaster”

Second 1099R - partial traditional IRA (different IRA account from the first 1099R) rollover to Roth

Input 1099R with data shown above for the second 1099R
Screen input – “No” button for Roth Simple or SEP account, “No” for inherited IRA and transfer to charity, (My spouse has an inherited IRA account that she is taking required minimum distribution. Does her IRA count toward this calculation since it is her IRA, not mine, but we are filing a joint return?)
“What did you do with the money?”-
“I moved money to another retirement account”, “I did a combination, of rolling over, converting, or cashing out”, “amount converted to Roth IRA = $57,500” ($60,000 gross minus $2,500 taxes withheld”
“did not put money in HSA”, “not disaster distribution”

“Continue” to “Any nondeductible contributions to your IRA?”

“Yes, I made and tracked nondeductible contributions to my IRA” (per the first 1099R that has $400 in Box 5?)
“Let’s find your IRA basis” -
Total basis as of Dec 31, 2022 – What is this number? Is it the Non-deductible IRA basis? If so, it would be zero since I did not have any after-tax distributions in 2022.
“EasyGuide” button -
“Let’s see if there was a basis in your traditional IRAs on Dec 31, 2022” – again, what is this basis? Is it non-deductible IRA basis, or total IRA balances that I had at the end of 2022?
I checked two boxes – “I filed Form 8606 in 2022”, and “I transferred money from an employer’s retirement plan to an IRA in 2023” (per the first 1099R with box 5 employee distribution)
“Transfer from employer plans” – “net rollover basis from employer retirement plans = $400” (I used $400 that is in box 5 on the first 1099R, but the broker’s 401K statement that show the distribution from 401K to traditional IRA has a different amount of $900 labeled “after tax”. When I put $900 in this box as a test, Form 8606 picked up the $900 and the $400 is nowhere to be found. Does TurboTax ignore the $ on Box 5 of the 1099R? I don’t know which $ to use.)
“Explanation” – I typed in “Some of the 401K rollover dollars were after-tax 401K contributions.” (Is the explanation sufficient? TurboTax generated a separate sheet to show this explanation)
“Report Basis From Form 8606” – “IRA basis on Dec 31, 2022 = 0” (when I clicked “find this”, it says 2022 line 14. My 2022 Form 8606 only shows #s on line 16-18, all the lines in Part including line 14 are blank. So I put in zero/blank. Am I correct?)
The next “EasyGuide” screen shows “rollover basis from employer retirement plans = $400”, all other lines are blank (including IRA basis as of Dec 31, 2022. Again, I don’t know what this is – is it non-deductible IRA from 2022, or my total IRA balances as of end of 2022?)
“Tell us the value of your traditional IRA” – Is this the total of all my traditional IRAs, including the one that I converted from a different 401K in 2022, and the 401K that I just partially converted in 2023? If so, the one for the conversion done in 2022 has a balance of $248,000 at end of 2023 per the broker’s traditional IRA statement. And for the one that the conversion done in 2023, the 1099R shows $200,000 gross distribution. The screen says the information is on Form 5498. Form 5498 for the conversion done in 2023 won’t be available until May which will be after the tax filing. The broker’s traditional IRA statement for the 2023 conversion shows $201,000 ($200,000 from 401K conversion plus investment gains). For the 2022 distribution, the Form 5498 for the 2022 conversion/distribution “rollover contribution of $300,000” and “fair market value of $247,000”. To recap:
2023 401K conversion – IRA initial rollover = $200,000, broker’s traditional IRA statement at end of 2023 = $201,000, Form 5498 is not available.
2022 401K conversion (a different 401K) – IRA initial rollover = $300,000, Form 5498 for the 2022 conversion = rollover distribution $300,000, fair market value $287,000, broker traditional IRA statement end of 2022 was $296,000, and the broker's traditional IRA statement as the end of 2023 was $248,000. (with subtraction of the $60,000 converted to Roth in 2023). Which numbers do I use – initial rollover, broker statement at end of 2022 or 2023, or fair market value, which for the 401K conversion done in 2023, I don’t have the Form 5498 to get the fair market value).
For the sake of testing, for the 401K conversion done in 2022, I used $248,000 on the traditional IRA broker’s statement at end of 2023, and for the 401K conversion done in 2023, I also used the $201,000 on the traditional IRA broker’s statement at end of 2023 (The 401K gross distribution was $200,000 per the first 1099R). The two IRAs total to $449,000.

Now the input is done. Looking at Form 8606:

Line 2, 3, 5 show $400
Below Line 3, A decision box asks “in 2023, did you take a distribution from traditional IRA...or make a Roth IRA conversion?". I made a Roth IRA conversion per the second 1099R which is for the traditional IRA that I converted in 2022. So it is “yes” and I go to Line 4, which would be zero since I was done with the Roth conversion at end of 2023?
Line 6 = $449,000 ($201,000 is on the broker’s stmt as of 12/31/23 for the 2023 401K partial conversion to traditional IRA related to the first 1099R; $248,000 is on the broker’s stmt as of 12/31/23 for the partial traditional IRA conversion to Roth related to the second 1099R)
Line 7 =$2,500 (per the second 1099R conversion to Roth, of the $60,000, $57,500 went into Roth, $2,500 went into taxes withheld)
Line 8 = $57,500 (second 1099R, $57,500 went into Roth)
Line 9 = $509,000 ($449M + $2.5M + $57.5M)
Line 10 = 0.00079 ($400/509,000)
Line 11 = $45 ($57,500 Roth amount x 0.00079)
Line 12 = $2 ($2,500 taxes withheld x 0.00079)
Line 13 = $47 (line 11 + line 12)
Line 14 = $353 ($400 minus $47) – this will become the non-deductible IRA basis for 2024? If I have additional 401K after-tax contributions converted to traditional IRA in 2024, the two numbers will be the total basis on the 2024 Form 8606?
Line 15a and 15c = $2,498 ($2,500 taxes withheld is “cash distribution”, which $2 is pro-rated as non-taxable amount to derive $2,498?)
Line 16 = $57,500 ($60,000 IRA distribution per the second 1099R that $57,500 went into Roth)
Line 17 = $45 (from line 11, pro-rated non-taxable Roth distribution based on the $400 after tax 401K contribution)
Line 18 = $57,455 ($57,500 Roth minus $45 non-taxable amount based on the $400 after tax 401K contribution)
TurboTax printed a separate sheet (no on the tax forms) which says “Some of the 401K rollover dollars were after-tax 401K contributions.” instead of on Form 8606.

Looking at 1040

Line 4a = $60,000 (gross distribution on second 1099R, converted portion of the traditional IRA started in 2022).
Line 4b = $59,953 ($60,000 minus $45 non-taxable pro-rated adj for Roth, and $2 non-taxable adj for cash distribution to fund the taxes withheld).
Line 5 a = $200,000 (first 1099R Box 1, gross distribution for the 2023 401K conversion to traditional IRA),
Line 5b = 0 (non-taxable event conversion from 401K to traditional IRA)

I know there is a lot to read. If you are willing to do the review, I appreciate very much of your time and feedback in advance. Thanks much.