Hi, I had the following contributions to my traditional IRA account: how much is taxable

[goyal_raj]

Hi,
I had the following contributions to my traditional IRA account:
5500  - contributed in apr 2019 for 2018
6000 (non deductible)- contributed in feb 2020 for 2019
6000 (non deductible) - contributed in feb 2020 for 2020
I then converted all of it into a Roth IRA in feb 2020.

I contributed 6000 in early feb 2020 but i had some confusion so i asked for a return and my Trustee returned the money.
Now in my 1099 R for 2022, i see the following in Box 1:
- 17592- which i converted- Box 2A shows taxable but box 2b says taxable amount not determined. Box 2b also says total distribution.
- 6000- Box 2A shows blank but box 2b says taxable amount not determined
- 5.09- taxable.

I entered the details in Turbo tax and it increases my tax by about 1400 dollars which i think is because of the 6000 that i asked them to return.
Should it be taxable and what can i do to get that amount reversed?
I would think that since i moved everything to Roth IRA, only 5.09 should be taxable.
Any ideas why Vanguard would show 6000 as taxable and what i can do to avoid paying tax on it or get it reversed since it was a nullified transaction?
Thanks in anticipation,
RG

[macuser_22]

You should have 2018 8606  form filed  with the $5,500 on box 1,3, and 14.

And a  2019 8606 form that should have the 2019 $6,000 on line1 and the 2018 carry forward on line 2, and the total $11,500 on line 3 and 14.

You must enter the 2020 contribution in the IRA contribution interview that will create a 2020 8606 with the 2020 contribution on line 1 and when  it ask if you tracked the basis you enter the lone 14 value ($11,500) form the line 14 from the 2019 8606.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2020.

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

NOTE: If there is an * next to line 15 then 6-15 will be blank and the calculations will be on the "Taxable IRA Distributions worksheet instead.

[goyal_raj]

Thanks macuser_22.

The basis on my 2019 8606 was not correct as it did not show my 2018 contribution. Not sure why. So in my current year return i changed the basis to 11500 and it corrected the total basis to 17500 and the added tax got removed.

Should I file an amended 8606 for 2019? Which form? Can I file just the 8606 alone?

In my 1099-R however, it shows 3 distributions of 17592, 6000 and 5.09. On the Form 1040 for 2020 I see that it included a distribution of 17597 out of which 97 is taxable but I do not see the impact of the 6000 that I had contributed by mistake and had got reversed and paid back to my account. It is shown separately on my 1099-R though and the total withdrawals are shown as 23597. How to make sure I acount for that 6000 correctly?

I also noticed that in my spouse's account, I think she contributed to a traditional IRA and then converted to Roth but the 1099-R statement shows only 11500 converted to Roth and 6000 are shown as direct contribution in the activity report for Roth. I am checking with my broker but this would mean that i should take money out of Roth (given that i am over the income limit) and pay penalty etc. Since I have not filed the return yet, I can withdraw it right away and just have to pay 10% penalty on 6000 and tax on any gains? IS that right? Is there a way to avoid this penalty given that I think she contributed to IRA first and then converted but I can't seem to find any audit trail for it.

Thanks again for your help,
Appreciate it

[macuser_22]

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@goyal_raj wrote:

Thanks macuser_22.

The basis on my 2019 8606 was not correct as it did not show my 2018 contribution. Not sure why. So in my current year return i changed the basis to 11500 and it corrected the total basis to 17500 and the added tax got removed.

Should I file an amended 8606 for 2019? Which form? Can I file just the 8606 alone?

In my 1099-R however, it shows 3 distributions of 17592, 6000 and 5.09. On the Form 1040 for 2020 I see that it included a distribution of 17597 out of which 97 is taxable but I do not see the impact of the 6000 that I had contributed by mistake and had got reversed and paid back to my account. It is shown separately on my 1099-R though and the total withdrawals are shown as 23597. How to make sure I acount for that 6000 correctly?

I also noticed that in my spouse's account, I think she contributed to a traditional IRA and then converted to Roth but the 1099-R statement shows only 11500 converted to Roth and 6000 are shown as direct contribution in the activity report for Roth. I am checking with my broker but this would mean that i should take money out of Roth (given that i am over the income limit) and pay penalty etc. Since I have not filed the return yet, I can withdraw it right away and just have to pay 10% penalty on 6000 and tax on any gains? IS that right? Is there a way to avoid this penalty given that I think she contributed to IRA first and then converted but I can't seem to find any audit trail for it.

Thanks again for your help,
Appreciate it

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Yes you can file an amended 8606 by itself it it does not change the tax.   You might also need to file  2018 8606 if you did not file one.

I don't know what you mean by "3 distributions" unless this is a financial institution that separates funds as different accounts  and reports them on separate lines on the 1099-R form. 

[goyal_raj]

Thanks for your reply.

My 2018 IRA contribution was deductible so there was no 8606. Would that change anything?

My financial institution (vanguard) did report three separate amounts on my 1099-R. They were all for one account only. But may be because 17500 was converted and 6000 was returned to me due to a mistake, so they separated it

[macuser_22]

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@goyal_raj wrote:

Thanks for your reply.

My 2018 IRA contribution was deductible so there was no 8606. Would that change anything?

My financial institution (vanguard) did report three separate amounts on my 1099-R. They were all for one account only. But may be because 17500 was converted and 6000 was returned to me due to a mistake, so they separated it

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Only non deductible contributions are reported on a 8606 form.  Deductible contributions are  funds in the IRA.  

[goyal_raj]

Thanks for your reply.

Would it then be wrong to club the non deductible and  deductible IRA amount totaling 11500 on line 2 on form 8606 for 2020 since i converted it all to Roth?

Thanks,