How do we get turbotax to file the 8606 if we are not making nondeductible contributions to our IRAs any longer? Last year they didn't and we over paid tax.

[dmertz · Accepted solution]

If you made no new nondeductible traditional IRA contributions for 2020, made no distributions or Roth conversions and made no nonqualified distributions from a Roth IRA in 2020, your 2020 tax return should not include any Form 8606.  Your previously filed Form 8606 still reflects your current basis in nondeductible traditional IRA contributions.  Your 2020 tax return should not include a Form 8606 just to repeat what is already shown on line 14 of your last filed Form 8606.

If your 2019 tax return should have included Form 8606 to calculate that taxable amount of a distribution from a traditional IRA but didn't, in TurboTax you failed to confirm your basis in nondeductible traditional IRA contributions after clicking the Continue button on the Your 1099-R Entries page.

[wexford13]

While we have not made nondeductible contributions,  we have taken required minimum distributions. The tax on these needs to be adjusted to reflect the nontaxable portion of the distribution. The form 8606 is, I believe, the vehicle for doing that. However, last year, TurboTax did not create the form when preparing our return, and we over paid income tax as a result. 

I need to know how to get TurboTax to prepare the 8606 in order to reduce the taxable amount of the RMD

Thanks

[wexford13]

Thanks, this is helpful

We will look for the opportunity to enter the basis as you suggest.

[dmertz]

If you have not already done so, you need to amend your 2019 tax return to make the same correction to include Form 8606 and obtain a refund of excess taxes paid.  The amount that transfers to your 2020 line 2 (the amount that 2020 TurboTax will ask you to supply after clicking the Continue button on the Your 1099-R Entries page) must be the amount from line 14 of your 2019 Form 8606.  Basis that should have been applied to the 2019 distributions but was not is not permitted to be carried forward to be used in later years.  The tax code does not permit you to pick and choose the year in which you apply the basis.

Note that TurboTax has a bad habit of silently deleting carried forward basis if you ever inadvertently answer No when asked if you made any nondeductible traditional IRA contributions for prior years.  This could be the reason if TurboTax included Forms 8606 for distributions made in years prior to 2019 but not for 2019.