Retirement tax questions

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@mmezzone wrote:

In 2020, I made contributions for both 2019 and 2020, to catch myself up for both years. (2019 contributions were made prior to 4/15/20) During 2020, I rolled all the contributions made for both years from the traditional ira, to the roth ira. I think those two issues combined are what are giving me the problem. The 1098r lists 10,494.28 on it for all the contributions. Fidelity listed distribution code 2 and checked boxes taxable amt not determined, total distribution, and ira/sep/simple. When I entered the form, they have both 10494.28 in both box 1 and 2. As a result, it is taxing me for the full amount. Based on another section I read, i changed box 2 to zero, and that is causing the issue when it goes through review check. What should I change about how I entered?

 

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First there is not such form as a "1098r" - do you mean a 1099-R?

It sounds like you are trying to do what is known as a "backdoor Roth".

There are two issues here.    As said above any IRA contribution*for* 2019 regardless of which yer it was contribution can ONLy be reported on a 2019 tax return.     Since you seem concerned that you are being taxes on the full amount then I am assuming that the 2019 and 2020 contributions were not deducted and were intended to by non-deductible basis that can offset the tax on a Roth conversion.

For that to happen the 2020 IRA contribution must be entered in the 2020 IRA contribution section and marked as non-deductible and will create a 2020 8606 form with the non-deductible contribution on line1.

You should have done the same thing on your 2019 tax return and have a 2019 8606 form with the 2019 contribution on lines 1, 3 and 14.

If yiu did not file a 2019 8606 then until you do you are not allowed to use it to offset the tax on a distribution.

You can amend 2019 to include the non-deductible contribution and report the 8606.

Enter your 2020 1099-R this way:

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, 2020.

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.

NOTE: If there is an * next to line 15 then 6-15 will be blank and the calculations will be on the "Taxable IRA Distributions worksheet instead.