IRA Cost Basis

[jays1951-gmail-c]

Hi,

I took my first 401K and  IRA distributions in 2024.  The IRA has non-deducible contributions tracked on Form 8606 (last used in 2005).  The 401K had after tax contributions.  The IRA RMD was distributed to me in 2024.

The 401K RMD was fully met by an NUA transaction on the ESOP portion of the 401K.  Per NUA requirements the 401K balance, outside of the ESOP, was was rolled over into a Traditional IRA (with after tax contributions).  So I now have a Traditional IRA with non-deductible contributions and a Rollover Traditional IRA with after tax contributions.  

My latest Form 8606 (from 2005) does not have any cost basis in it for the after tax part of the Rollover IRA.  My research implies you don't report the cost basis of a Rollover IRA until the 1st year you get a distribution and I didn't get a Rollover IRA distribution in 2024 (it was covered by the 401K ESOP distribution).

TTax is asking me for the total of all IRAs to determine the taxable amount of the 2024 IRA distribution.  Do I add the two IRAs together?  It seems incorrect as Form 8606 has no cost basis yet for the Rollover IRA and there was no distribution from this IRA in 2024.

Just as side note, we live in FL in the winters and my historical Form 8606 was at our residence in NY.  Therefore I filed an extension for this years return.

[dmertz]

"Do I add the two IRAs together?"

Yes, when TurboTax asks for the year-end balance, it's asking for the combined value of two IRAs on December 31, 2024.

The rollover of after-tax funds from the 401(k) to the traditional IRA requires an adjustment on your 2024 Form 8606.  When TurboTax asks if you made nondeductible contributions to your traditional IRAs, answer Yes.  Click the EasyGuide button that TurboTax presents, then, when presented with a number of boxes for different types of adjustments, enter in the box for after-tax funds from an employer plan the amount of after-tax funds rolled over.  Enter this even if 2024 TurboTax asks only for after-tax amounts rolled over prior to 2024, after-tax amounts rolled over from employer plans in 2024 are to be included.  TurboTax will then ask you to provide an explanation statement for this adjustment and will include the adjustment on line 2 of Form 8606.

"there was no distribution from this IRA in 2024."

It doesn't matter which IRAs the 2024 distributions cam from.  All of your traditional IRAs, including the rollover IRA, are treated as one combined IRA for tax purposes.