SOLVED
I had a similar issue whereby I contributed $6k for 2020 and $6K for 2021. Unfortunately, my 1099-R showed a gross distribution of $12,000 which was causing both my state and federal taxes to increase. The notes above about an 8606 were not particularly useful as I could not directly edit the 8606. Here's how to resolve the issue:
- Go to Wages & Income ->IRA, 401(k), Pension Plan Withdrawals -> Edit/ Add
- Edit the 1099-R (with the $12k distribution)
- Keep the $12,000 on the 1099-R Box 1 (possibly box 2 as well)
- "Continue" until you reach "Any Nondeductible Contributions to Your IRA?"
- Select "Yes"
- If you properly filled out a form 8606, or did TurboTax for the previous year, noting your $6k contribution for the first year, you should then have a tax basis. When I review form 8606 from TurboTax for 2020, Line 14 shows "total basis in traditional IRAs for 2020" of $6,000. You can download your 2020, or previous year forms, by going to "Documents" on the left hand navigation.
- Enter a total basis from Line 14 on your 8606. If you did the full amount, it should be $6,000
- "Continue." Everything else should be the same - your state and federal taxes should go back to normal.
