Basis Handling for Multiple IRAs

[jknauth]

Until recently I have had a single IRA account and each year do an RMD
withdrawal from it. Because of the way I had made my IRA contributions,
the IRA has a small basis. Each year part of the RMD is considered part
of the basis. So the basis is reduced by that part of the RMD
withdrawal and also that part of the RMD is not taxable. I know how to
do all that and TurboTax has been in sync with my calculations each
year.

However this year I have divided my IRA in two, one IRA managed by a
broker and the other managed by me. I have been told I can take the RMD
from either or both accounts. The total RMD sum just must equal what
would be required if the total IRA year-end funds had been in a single
account. That sounds easy and hopefully Turbotax can handle it easily.

My question is about handling the basis for the now split IRA. Can I
handle the basis calculations as if the two IRAs were still one, summing
the two IRA year-end values for the basis calculation, as for the RMD
calculation? How does TurboTax handle multiple IRAs for such RMD and
basis calculations? I know I will get two 1099-Rs and presumably will
have to enter both into TurboTax. The above calculations seem to
require a virtual merger of the two 1099-Rs.

Or is this going to be a lot more complicated (hopefully not) and the
basis has to be apportioned across multiple accounts or put in just one
account? If so, how does TurboTax handle that?

[Critter]

Ok ... you are making this into a big deal when it is not ... having more than one IRA account means nothing in the income tax world.  After you enter the one 1099-R for the RMD all you have to do is follow the interview screens just like you did with only one IRA to report.  To the IRS all the IRA accounts are considered as one. 

[macuser_22]

You can NEVER withdraw ONLY the nondeductible part - it must be prorated over the entire value of ALL Traditional IRA accounts which include SEP and SIMPLE IRA's. (For tax purposes you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together).

For example using rough figures: if you had $60K of nondeductible contributions in an IRA with a total value of $600K (10:1 ratio), then when you take a $60K distribution from any IRA account $6,000 would be nontaxable and $54,000 would be taxable (same 10:1 ratio) , with the remaining $54K of basis staying in the IRA for future distributions. As long as there is any money in the IRA, there will be some basis.

TurboTax will ask for your non-deductible "basis" and then the *Total Value* of *all* Traditional IRA, SEP and SIMPLE accounts as of Dec 31, of the tax year. That is so the prorating of the basis can be properly proportioned between the current years distribution and the remaining IRA value. That is done on the 8606 form.

[dmertz]

"Can I handle the basis calculations as if the two IRAs were still one, summing the two IRA year-end values for the basis calculation, as for the RMD calculation?"

Not only can you do so, the tax code requires you to do so, treating your traditional IRAs as a single account for this purpose.  All of your traditional IRA distributions (except for Qualified Charitable Distributions, HSA Funding Distributions, amounts rolled over, recharacterizations of contributions and returns of contributions; of these, someone subject to RMDs would probably only potentially do a QCD), basis and total year-end value of your traditional IRAs are included on a single Form 8606 Part I for calculating the taxable and nontaxable amounts of distributions.  The answers provided by the others indicate how TurboTax takes the input that TurboTax places on Form 8606.

[jknauth]

Thanks to everyone for the helpful responses.  I suspected that's the way it should work, but in this world you never know.