Inherited IRA: Caution: TurboTax is using basis for a non-inherited IRA held by same person.

[GaryK30]

@JayB5Great news. I'm glad someone was able to get to a representative at TurboTax who actually knows what's going on with this problem. Thanks for letting us know.

[dwb54A]

Great!   I wish TurboTax would briefly describe what is in their "program updates" so we know what is "fixed." Appreciate your post.

[GaryK30]

The TurboTax update that I received yesterday seems to have fixed the IRA withdrawal taxation problem, at least for my situation (withdrawal from inherited IRA with no cost basis, no contribution or withdrawal from traditional IRA with a cost basis). Yesterday I had loaded my test return, but there was no change to the calculations, which initially made me think the update didn't fix the problem.

Today, to get the calculations to change, I had to edit the 1099-R in the Step-by-Step view (but no changes were made to the data inputs in the form), then go through all of the interview questions for this 1099-R as well as the final interview questions related to IRAs. At this point, the calculations were correct. I saved the file and reloaded it, and the calculations were still correct. In my case, this means that the entire inherited IRA withdrawal shows as being taxable on Form 1040 (correct), and that the basis in my traditional IRAs does not come into play regarding the taxable amount on the inherited IRA withdrawal (also correct).

[gattaca]

^^^ Morning @GaryK30  Thank you for posting how you essentially needed to get the update downloaded, then bounce thru the 1099-R from start to finish - with no actual changes to the figures but you did need to answer the questions.  😉  I've not tried for my setup yet.  My immediate thoughts and questions are: 

1. Did you need to also remove the "overrides" you added to the 8606 and possibly other forms first and when did you remove those?  Before or after the update or running thru the interviews?
2. I've not tried anything for my setup.  My gut feeling is that I'll make a new copy of my current "over-ridden but correct math" file, run the updates, remove the form overrides, then walk thru the Q/A setup of each 1099-R (if there are multiples).
3. Do you recall if it took just walking thru 1 x 1099-R or each 1099-R? 

Since many situations are different, I'm trying to make sure we consider that we have a good math file as a backup to restart with should this update's math revert to "wrong" for some tax situations.   In the end, we want the math right without any overrides on both the "Inherited IRA basis" and anything connected to the traditional IRA basis, especially the separate cost basis or contributions made to the separate traditional IRAs. 

Thanks so much for sharing your update!  Stay safe, stay alive!  Peace.

[GaryK30]

@gattacaI just loaded my test return and real return again so I could answer your questions. Believe it or not, the calculation error has come back on both returns, even though I had saved and reloaded both returns before to test the fix, and the calculations were correct in both cases at that time. I have no idea why loading the same returns several hours later, with no additional updates applied, would mess up the calculations again.

What a crazy problem. I guess I'll have to wait for the next update, then test it by saving and trying multiple reloads of the file over a day to make sure it's really fixed.

[gattaca]

@GaryK30  Oh WOW!  :(  So sorry. That outcome was not what I was expecting.  Are we sure TT actually released their fix for this IRA mess on 3/2?   I recall someone posting they spoke with TT and the target repair was posted as being ~ 3/5 somewhere. 

From what you've just described, maybe not yet? 

TT needs to also post a "readme" or have a "release thread" listing everything they "fixed" in these releases. In the meantime, copying / backing up or saving with a different name a "right math with over-rides" file seems prudent now.  I'm sorry I did not think of that earlier as an action plan to preserve where we are at least.  Thanks!  Stay safe, stay alive!  

[GaryK30]

I received another TurboTax update today.

When I loaded my test tax file and real tax file, the calculations were correct in both (inherited IRA fully taxable), which was not the case two days ago when I last looked at the files. I ran through the entire process for the inherited IRA, including all of the interview questions, and the calculations were still correct. I saved and reloaded the files and the calculations were still correct. I ran the Review process (the prior to e-filing) and the calculations were still correct for both files.

I'll have to load the files later today or tomorrow to see if the correct calculations "stick" this time, unlike the other day when they reverted to "bad math" after several hours, which was really strange.

[gattaca]

Please keep us posted.  I've not had the chance to run my plan as outlined above.  Will post here when I do.   Stay safe, stay alive.  Peace. 

[dwb54A]

The program updates loaded yesterday, 3/5/21, (TurboTax 2020.48.20.71) seems to have fixed the problem I was having.  The basis for non-inherited IRA is not being used for inherited IRA in my case and remains true even after saving return and restarting Turbo Tax.

I'm still not happy that Intuit does not summarize the program changes made in their program releases either via a Readme or some other summary.

Thanks to all who went the extra mile with Intuit support.

[GaryK30]

I did a final eyeball check on my returns. Everything looked good, so I e-filed them. I've received emails indicating that both the federal and state returns have been accepted. It was a struggle, but it appears everything is okay now, at least for my situation. Let's hope next year's TurboTax doesn't have any more IRA-related bugs.

[shirley16]

It is now March 14 and it appears that the problem has not been fixed.  I was able to zero out the basis for my inherited IRA and thus eliminate the form 8606, but box 4a of the 1040-SR now shows nothing.  I believe the amount distributed from the inherited IRA should show up in both boxes 4a and 4b.  I haven't tried to run review or e-file yet to see if this will work.  

From what I'm reading here, filing for next year is going to be a mess since I will also need to take RMDs from my own traditional IRA which has both deductible and non-deductible contributions.

[dmertz]

shirley16, your Form 1040SR is correct.  Per the instructions for Form 1040, if the entire amount of IRA distributions is taxable, it is to appear only on line 4b and line 4a is to be left blank.

[shirley16]

Thanks!

[GaryK30]

@shirley16  After the March 4 software update, I didn't have to zero out the basis on my traditional IRA (on the IRA Info Worksheet) in order to get the proper taxable amount on my inherited IRA to show up on line 4b (line 4a is blank). No unneeded Form 8606 was generated (I did not contribute to, or take a distribution from, my traditional IRA).

[gattaca]

I can confirm after the last updates, the IRA math and forms were corrected by Intuit - at least for my situation.  You do have to remove any "overrides" put in place before any submission is accepted.    Peace.