dmertz
Level 15

Retirement tax questions

I can see why this is complicated because of the way TurboTax might do 2017.

 

Treating all contributions as nondeductible:

 

2015 Form 8606:

Line 1 = $5,440

Line 2 = $0

Lines 3 and 5 = $5,440

Line 6* = $0

Lines 8* and 9* = $5,407

Line  10* = 1.000

Lines 11* and 13 = $5,407

Line 14 = $33

Line 15c = $0

Line 16 and 17 = $5407

Line 18 = $0

 

* calculation probably done on a separate worksheet by TurboTax but the result is the same

 

The unrecoverable $33 of basis probably reported as a miscellaneous deduction on Schedule A reducing the basis to zero, but likely less than 2% of AGI so the deduction provides no benefit.   Basis to carry over to 2016 is $0.

 

2016 Form 8606:

Line 1 = $1,400

Line 2 = $0

Lines 3 and 14 = $4,700

 

2017 Form 8606 (the method I prefer since you don't need to figure your modified AGI to know that your entire IRA contribution is nondeductible)

Line 1 = $5,500

Line 2 = $4,700

Line 3 = $10,200

Line 4 = $2,500

Line 5 = $7,700

Line 6 = $3,047

Line 8 = $4,900

Line 9 = $7,947

Line 10 = 0.969

Lines 11 and 13 = $4,748

Line 14 = $5,452

Line  15c = 0

Line 16 = $4,900

Line 17 = $4,749

Line 18 = $152

 

However, because there was a nondeductible contribution for 2017 a distribution (conversion) was also done in 2017, TurboTax does the ratio calculation on a separate worksheet under the assumption that you need to use the worksheet because you do not know how much of your IRA contribution is deductible, resulting in the entire conversion coming from basis:

 

Line 1 = $5,500

Line 2 = $4,700

Line 3 = $10,200

Line 4 = $2,500

Line 5 = $7,700

Lines 11 and 13 = $4,900

Line 14 = $5,300

Line  15c = 0

Line 16 = $4,900

Line 17 = $4,900

Line 18 = $0

 

2018 Form 8606

Line 1 = $5,500

Line 2 = $5,452 or $5,300 depending on which way 2017 was done

Lines 3 and 14 = $10,952 or $10,800 depending on which way 2017 was done

 

2019 Form 8606

Line 1 = $6,000

Line 2 = $10,952 or $10,800

Line 3 = $16,952 or $16,800

Line 4 = $0

Line 5 = $16,952 or $16,800

Line 6 = $0

Lines 8 and 9 = $18,066 (current value)

Line 10 = about 0.930 but the actual value doesn't really matter since you are converting the entire balance

Lines 11 and 13 = $16,952 or $16,800

Line 15c = $0

Line 16 = $18,066 (current value)

Line 17 = $16,952 or $16,800

Line 18 = $1,114 or $1,266

 

From 2016 through 2019 you will have contributed $21,700 and converted $22,966 resulting in a taxable amount between 2017 and 2018 totaling $1,266.

 

Regarding the calculation for 2017, TurboTax is using Worksheet 1-1 in IRS Pub 590-B:

https://www.irs.gov/pub/irs-pdf/p590b.pdf

 

If you choose to file 2017 Form 8606 as prepared by TurboTax using the worksheet, I would probably include a copy of the worksheet prepared by TurboTax.