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New Member

all 1099-R flowing to 8606 in TurboTax (even those for RMD on inherited IRA with code 4 in box 7)

I received two 1099-R forms which imported no issues and lines 4a and 4b on the 1040 are perfect (had 1603 which was taxable, 1600 from inherited IRA and $3 growth on 7000 converted to Roth).

However, on the form 8606 line 15a has been prepopulated with 1603. The 1600 was from an inherited IRA so it should in no way be considered in my cost basis for the other IRA (now converted to Roth).

I can't manually remove the 1600 - not sure how to correct but don't want to report wrong basis to IRS.

Line 13 is correctly the 7000, lines 7 thru 12 are blank. I expected line 15a to be just the $3 (gain on the non-inherited 1099-R).

I verified the 1099-R for the inherited IRA with 1600 has code 4=death in box 7 (other one had code 2)

Suggestions? It had worked fine for my 2018 taxes in TurboTax, not sure why now different for 2019.

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Level 15

all 1099-R flowing to 8606 in TurboTax (even those for RMD on inherited IRA with code 4 in box 7)

An inherited IRA with a code 4 is not eligible to be rolled over.   It can only be transferred to another benificuary Traditional IRA that must remain in the deceased name with you as benificuary.

 

If you inherited from a spouse then you can choose to treat it as your own IRA and have the custodian of the inherited IRA move it to your own Traditional IRA - only then could you then convert your own Traditional IRA to a Roth.    An inherited IRA can never be rolled over or converted to a Roth.   Any money in the Roth would be an excess contribution subject to a 6% penalty that repeats every year until removed.

 

Also distributions form an inherited Traditional IRA that has an after tax basis cannot produce a 8606 in TurboTax because it is not in your name but in the name of the deceased and must be filed on a separate 8606 paper form attached to your mailed tax return.   The after-tax basis in an inherited IRA (and 8606) must be kept totally separate from your own IRA and basis (unless you are the spouse and had it transferred to your own IRA as explained above).

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

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3 Replies
Highlighted
Level 15

all 1099-R flowing to 8606 in TurboTax (even those for RMD on inherited IRA with code 4 in box 7)

An inherited IRA with a code 4 is not eligible to be rolled over.   It can only be transferred to another benificuary Traditional IRA that must remain in the deceased name with you as benificuary.

 

If you inherited from a spouse then you can choose to treat it as your own IRA and have the custodian of the inherited IRA move it to your own Traditional IRA - only then could you then convert your own Traditional IRA to a Roth.    An inherited IRA can never be rolled over or converted to a Roth.   Any money in the Roth would be an excess contribution subject to a 6% penalty that repeats every year until removed.

 

Also distributions form an inherited Traditional IRA that has an after tax basis cannot produce a 8606 in TurboTax because it is not in your name but in the name of the deceased and must be filed on a separate 8606 paper form attached to your mailed tax return.   The after-tax basis in an inherited IRA (and 8606) must be kept totally separate from your own IRA and basis (unless you are the spouse and had it transferred to your own IRA as explained above).

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

Highlighted
Level 15

all 1099-R flowing to 8606 in TurboTax (even those for RMD on inherited IRA with code 4 in box 7)

"An inherited IRA with a code 4 is not eligible to be rolled over"   ... except by a spouse beneficiary to the spouse's own IRA, in which case the decedent's basis in the amount rolled over becomes the surviving spouse's basis.

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New Member

all 1099-R flowing to 8606 in TurboTax (even those for RMD on inherited IRA with code 4 in box 7)

@macuser_22  thanks - you are right; I did not convert the inherited IRA to a Roth, it's just an inherited IRA.

 

I found where in the interview I should have answered yes on inheriting it from <institution> (I had said no since I inherited it from a person not the reporting institution). Fixing that and giving the name and born after 1948 caused it to no longer flow to the 8606 (it's correctly now just my non-inherited IRA info).

 

Thanks