2024 RMD IRA Basis Calculation

[joe c2]

I am using 2024 TurboTax Deluxe Desktop.  2024 is the first year that I had to report a Traditional IRA RMD which was reported on 1099Rs.  TurboTax placed my entire RMD amount in 1040 Line 4b (IRA 'taxable amount').  It also removed all of my Traditional IRA 'Basis' in Line 1, 3, 12 and 17 in the 'IRA Information Worksheet'.  My question is where did the IRA Basis go?  I had expected that the basis amount would be subtracted from my full IRA distribution to get the 'Taxable amount' for 1040 line 4b.  Instead the basis amount is not reflected on any form of my 2024 taxes...like it never existed.  Also there is no Form 8606 in the list of forms so I don't know if that is unusual.

[DanaB27]

After entering your Form 1099-R and selecting continue you should have seen the "Any nondeductible Contributions to your IRA?" screen and then a screen to enter/review your prior year basis from your last filed Form 8606 (if you made nondeductible traditional IRA contributions).

If you do not see the basis screen then please see Why am I unable to report my 2023 for 8606 basis?

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. On the "Review your 1099-R info"/"Your 1099-R Entries" screen click "Continue"
5. Answer "Yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
6. Answer the questions about the basis from line 14 of your 2023 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[joe c2]

DanaB27, thank you for your prompt response and explanation.  That said, I am really disappointed that the software, knowing that I have been reporting a traditional IRA basis for many years, would not flag or question my response about previous non-deductible IRA contributions.  Further, it seems inconceivable that the program would simply zero-out my basis on the tax worksheet (and 8606 which does not appear in the 2024 Forms listing) going forward without some kind of warning.  I have used TurboTax exclusively for over 20 years with the faith that loyalty to a single software program would ensure better control of carry forward data such as IRA basis.   I have to wonder how many users have had this happen when they reported their first IRA MRD and never knew they made an error.  Unfortunately I have already filed with this error and paid a higher tax than necessary.

[dmertz]

If your IRA Information Worksheet in the 2023 TurboTax tax file that you transferred into 2024 TurboTax to begin your 2024 tax return shows your basis, the only reason that your basis would disappear from your IRA Information Worksheet in 2024 TurboTax is if you inadvertently answered No when 2024 TurboTax asks if you have basis in nondeductible traditional IRA contributions.  If you answer No (which I believe is the default answer if you just click the Continue button without changing the answer to Yes), TurboTax will silently delete your basis information, without asking for any confirmation.  Over several years I complained about this deficiency in TurboTax but my concern was ignored and a confirmation to delete basis information was never added, generally blaming the problem on user error.  I finally gave up trying to get the TurboTax developers to make this simple, important change.

[joe c2]

Thanks dmertz.  I hope along with you that TurboTax heeds your advice and updates the software.

I have already filed my 2024 Federal electronically via Desktop TurboTax with payment due to be taken from my bank account near April 15.  So what do I do now?  Should I file an amended return now?  If so, how do I correct the error where I failed to get credit for my IRA basis?  Also, can I refile electronically using one of my remaining (included) TurboTax e-files?  Thank you for your support.

[dmertz]

You would need to amend your 2024 tax return to make the correction by filing Form 1040-X and Form 8606.   (Other forms could be involved if the reduction in AGI affects other forms.)  It's generally advised to wait to file the amendment until after the IRS has processed your original tax return.  Given that the balance due is to be debited from your bank account near April 15, I would wait until at least then to file the amendment.  You have until April 15, 2028 to file the amendment, but it makes sense to do that much sooner so that the tax file that you transfer into 2025 TurboTax will have the correct amount of basis on the IRA Information Worksheet.

I haven't used TurboTax to e-file an amendment, but I think I've heard that TurboTax now accommodates doing so.  Otherwise you can file your amendment on paper.

[joe c2]

dmertz, thank you for your support.  To add to the confusion I just looked at my 2024 Massachusetts State tax that I filed at the same time as my Federal and see that TurboTax did not adjust my IRA Distribution for my lifetime of making non-tax deductible contributions to my IRAs. Massachusetts fully taxes all contributions to a Traditional IRA so you are allowed to deduct those contributions when you begin taking IRA distributions.  What, if anything, did I miss in the State tax EasyStep interview?  Thanks.  joe

[dmertz]

I know nothing about Massachusetts income taxes.