IRA Deduction

[tbert56783]

Neither my wife nor I,  are covered by a retirement plan at work. Why won't Turbotax allow us to deduct an IRA contribution, when it has in past years? I am receiving a pension from a former employer but that shouldn't matter, especially for my wife. Any help is appreciated.

[AnnetteB6 · Accepted solution]

It is difficult to say what is preventing you from being able to deduct a Traditional IRA contribution if your tax situation is similar to what it was in past years.  No one here is able to see your return to give you that specific advice.

Take a look at the following TurboTax help article to learn more and see if any of these situations fit what you are seeing on your return:

How much of my Traditional IRA contribution is deductible in 2022?

[tbert56783]

Based on the article you referenced and the IRS guidance our deductions should be fully deductible. The interesting thing is that I just did my son's taxes, who works part time at a convenience store, and Turbotax says his contributions aren't deductible either. Seems like a Turbotax problem. I'll have to contact them. Thanks for your help.

[AnnetteB6]

If you would be willing to provide a diagnostic copy of your tax file, we can take a closer look and try to explain what is causing the contribution to not be deductible.  The diagnostic file will not contain personally identifiable information, only numbers related to your tax forms.  If you would like to provide us with the diagnostic file, follow the instructions below and post the token number along with which version of TurboTax you are using in a follow-up thread.

Use these steps if you are using TurboTax Online:

• Sign in to your account and be sure you are in your tax return.
• Select Tax Tools in the menu to the left.
• Select Tools.
• Select Share my file with agent.
• A pop-up message will appear, select OK to send the sanitized diagnostic copy to us.
• Post the token number here. 

If you are using a CD/downloaded version of TurboTax, use these steps:

• Select Online at the top of the screen.
• Select Send Tax File to Agent.
• Click OK.
• Post the token number here.

@tbert56783 

[tbert56783]

Token number 1122143. Using CD version of TurboTax Home and Business.

[AnnetteB6]

Thank you for sending your token number.  I opened your tax file and noticed that you have not entered any information for contributing to an IRA for the 2022 tax year.  I was able to enter a $7000 contribution to a Traditional IRA for both the taxpayer and spouse without any issues.  The full contribution amount is deductible.  

Use the following steps to go to the IRA contribution section and enter your contributions:

• On the top row of the TurboTax screen, click on Search  
• This opens a box where you can type in “IRA contributions” 
• The search results will give you an option to “Jump to IRA contributions”
• Click on the blue “Jump to IRA contributions” link 

Be sure to check the boxes for Traditional IRA under both names.  Then go through the section and enter the amount that you plan to contribute before April 18, 2023.

If the 'jump to' link does not work, go to Personal > Deductions & Credits > Retirement & Investments > Traditional and Roth IRA Contributions and click Start or Update.

@tbert56783 

[tbert56783]

So you're telling me I should ignore the message that says, "It turns out you don't qualify for a retirement tax break"? In addition, when I do as you suggested, it tells me I got a deduction, but doesn't change my refund amount. Shouldn't my refund be higher with an additional deduction?

[JulieS · Accepted solution]

It depends on the details of your tax return. 

In general, a deduction will increase your refund, but if you have already reached your maximum potential refund, more deductions don't result in a higher refund. 

For example, if you have $40,000 in income and had $3000 in tax withheld and no tax credits. If you have $26,000 in itemized deductions, you will get the $3000 back as a refund. 

An additional $7000 IRA deduction won't result in a higher refund because your total tax is already $0.

Check line 24 of your Form 1040. If that number is $0, you can't get a higher refund through more deductions.

[tbert56783]

Thanks. In going back over the forms, I realized that the amount of tax due is self-employment tax. If I understand correctly, I can't reduce that as it is related to social security and medicare.

[JulieS]

Yes, that is correct. 

[icnewer]

Hi experts, I can't remember whether I took the IRA contribution as the deductible or not in the past few years tax filed, where can I find the clue or verify whether I took IRA deductible or not from the 1040 forms?

[DianeW777]

First check the 1040 form for each year, Schedule 1, Part II, (line 20 2023)  IRA Deduction.  If there is none then you didn't take the deduction, in which case you should look for Form 8606 for each year or the most recent form in 2022, if applicable (should carry the accumulated amount).

@icnewer 

[icnewer]

Thank you @DianeW777 ! I got the idea on where to check IRA deductible, but a follow-up question: 

what should I do if I did a traditional IRA conversion to Roth in 2019 tax year but forget to report it correctly? (and I'm not 59yrs old yet)?  Should I file a tax amend for tax year 2019 now, otherwise will be a big penalty later down the years? (though the traditional IRA contribution was likely after-tax, that I need to double check from previous tax files). 

[DianeW777]

You definitely need to amend to be sure your cost basis is all collected to your Roth.  You should have received a 1099-R when the money was moved to the Roth IRA.  Also be sure to file a form 8606 if necessary.

If you already filed your returns and you need to amend or change them you can use the links below to get started:

• How do I amend a prior year return?  

Your tax return shouldn't really change if you did not deduct your traditional IRA contributions.  If that's the case I probably would not amend at this point.  You can file the 8606 alone and sign it.

@icnewer 

[icnewer]

Thanks, @DianeW777 so we can just do a form 8606 update on 2019 yr conversion? it's already 3+ yrs, so it's still possible to do it without that "up to 3yrs amend update" rule? (assuming all my traditional IRA contribution is after-tax so I won't do the filing amend but just a 8606 update).