I have Form 8606 because I made a non-deductible contribution to a traditional IRA and then rolled it into my Roth IRA (backdoor contribution). This was for 2018, all done in March 2019.
Now amending the return to pay tax on the gain on the excess 2018 Roth IRA contribution that I withdrew in March 2019.
Correct, assuming that you are not a spouse beneficiary who has elected to treat the inherited IRA as your own.
If the decedent had basis in nondeductible traditional IRA contributions, the year-end value of the inherited IRA would have to go on a separate Form 8606 prepared outside of TurboTax to determine the taxable amount of any distributions from the inherited traditional IRA and then only the taxable amount determined on that form entered into TurboTax when entering the code 4 Form 1099-R reporting the distributions from the inherited IRA. If the decedent had no nondeductible traditional IRA contributions, the entire amount shown on the code 4 Form 1099-R is taxable and no Form 8606 for the inherited IRA is needed.
Correct, assuming that you are not a spouse beneficiary who has elected to treat the inherited IRA as your own.
If the decedent had basis in nondeductible traditional IRA contributions, the year-end value of the inherited IRA would have to go on a separate Form 8606 prepared outside of TurboTax to determine the taxable amount of any distributions from the inherited traditional IRA and then only the taxable amount determined on that form entered into TurboTax when entering the code 4 Form 1099-R reporting the distributions from the inherited IRA. If the decedent had no nondeductible traditional IRA contributions, the entire amount shown on the code 4 Form 1099-R is taxable and no Form 8606 for the inherited IRA is needed.
No, I was not the spouse beneficiary. I inherited traditional IRAs from my parents. They didn't have any basis in non-deductible contributions. Thanks!
Everywhere I read says that when the 1088-R has code 4 (inherited), then the gross amount should not flow to the taxpayer's 8606. Unfortunately, it does for the 2020 version of TurboTax. I can't figure out a way to make it stop.
There is no basis for my inherited IRA, so I don't need a form 8606 for the inherited IRA. I really would prefer not to override the 8606 so that my taxable amount would be correct. Since inherited IRA's are supposed to kept separate and TurboTax is not able to have a separate 8606 for inherited IRA's, I would think it would be consistent and not have the amount flow to the 8606.
Hope someone has an answer or TurboTax provides a fix.
@bprice1946 I made an entry as you described and TurboTax did not generate a form 8606. If you are using the desktop version of TurboTax you need to make sure you have done all of the updates (Online, Check for updates).
You may be able to delete the form 8606 by using the following tabs in TurboTax online if you are sure you don't need the form:
Find form 8606 in the list and delete the form.
TurboTax presently has a bug that is causing distributions from an inherited IRA to inappropriately appear on the beneficiary's own Form 8606, so ThomasM125's suggestion will not accomplish anything. This is being investigated by Intuit.
@bprice1946 wrote:
Hope someone has an answer or TurboTax provides a fix.
If you see the inherited IRA amount on the 8606 line 7 then try this and see if it goes away.
Just edit the inherited 1099-R and change NO to YES and back to NO. When I did that it make the incorrect 8606 line 7 amount go away.
@ThomasM125 I believe this bug only shows up if the taxpayer has an IRA distribution of their own IRA that has a basis and that creates the 8606-T (or -S). Adding a 1099-R with a box 7 code 4, seems to erroneously add the inherited 1099-R box 1 amount to the 8606 line 7, which results in totally incorrect taxable amounts on the 8606.
For some reason simply toggling NO to YES and back to NO on the inherited basis question removes it from the 8606.
All, thank you for your patience while we have been investigating. During our investigation we were able to get this to work properly by following the steps in this post: Where do I show income for an inherited IRA
Would you all mind please letting me know if you still encounter an error using those steps? Thanks again!
@Katie_B wrote:
All, thank you for your patience while we have been investigating. During our investigation we were able to get this to work properly by following the steps in this post: Where do I show income for an inherited IRA
Would you all mind please letting me know if you still encounter an error using those steps? Thanks again!
@Katie_B I believe that link is for a different problem encountered when the 1099-R is 'split" - part rolled over and part taken in cash. That is not the situation here where the inherited amount is improperly added to the taxpayers own 8606 form.
Thanks so much for the follow-up! I'll see what else I can locate
Nope. still treats inherited IRA (non-spouse) just like my own IRA's. Probably has been for years, but this year it is obvious to me since I didn't take an RMD from my IRA's which require form 8606. Low and behold, my inherited income (which has no basis so should not have any 8606) showed up on my 8606. The trick mentioned above of turning on and off the radio button for whether the inherited IRA has a basis helps, but you have to keep watching it since the issue comes back for no reason I can fathom, Then I just repeat the work around and all is well for awhile. Hopefully will be fine at the time that I file.
@bprice1946 wrote:
Nope. still treats inherited IRA (non-spouse) just like my own IRA's. Probably has been for years, but this year it is obvious to me since I didn't take an RMD from my IRA's which require form 8606. Low and behold, my inherited income (which has no basis so should not have any 8606) showed up on my 8606. The trick mentioned above of turning on and off the radio button for whether the inherited IRA has a basis helps, but you have to keep watching it since the issue comes back for no reason I can fathom, Then I just repeat the work around and all is well for awhile. Hopefully will be fine at the time that I file.
It will come back if you revisit the 1099-R. You want to be sure that the 8606 is correct just before you file.
@bprice1946 I have this exact same issue where the Inherited IRA distribution and consequent use of the cost basis for the taxpayer's personal Traditional IRA was being used for the Inherited IRA (which had no basis.) Definitely a glitch in the software this year as other years it has been reported correctly. I spent two hours on the phone with the Turbo Tax agents. They escalated to higher level but even then they had questionable understanding of the tax rules regarding this and were unable to correct this. They weren't aware of a workaround other than manually overriding the form (and thus requiring me to have to mail in return vs e-file, which isn't acceptable in my opinion.) I actually traced this error back to the worksheet (1099R Summary Worksheet) and found that the Inherited IRA distribution is not being correctly backed off on the worksheet on Line 1c, nor is it being entered on the taxable amount line 7 of the worksheet so that the tax can be calculated outside of the 8606.) I am glad to know I am not the only one with the problem and that Intuit is working on it. I will try the suggested workaround. The Inherited IRA definitely should not be appearing on the 8606. Thanks.
I just tried the suggested workaround of toggling the deductible/nondeductible contributions button on the interview. It worked! Now the entries are correct and the Inherited IRA did not carry over to the 8606 in error. Thanks for the suggestion! Turbo Tax still needs to fix this as not everyone will recognize this error or know that TT is reporting it incorrectly.
@bprice1946 Re: your comment "Nope. still treats inherited IRA (non-spouse) just like my own IRA's. Probably has been for years...", I wanted to reassure you that the issue with the Inherited IRA being transferred to the 8606 this year did not appear in on any of my returns in previous years. I think this is the first year to have this software glitch. 🙂
Toggling No to Yes and back to No on the inherited IRA basis question only corrects the amount on line 7, Form 8606 temporarily. When you restart TurboTax, the amount on line 7 includes the inherited IRA distribution again.
You can also temporarily fix the problem by changing the code in box from 4 to 7 and back again. But, again, the fix is only temporary.
I believe TurboTax requires a more permanent fix to the coding.
Contact customer support and report the problem.
There is no single published number because it changes contently depending on the nature of the call and agent availability. Following the link below will either give a current number for you to call or take your number for a callback.
(Note that phone support is for paying customers only. There is no phone support for Free Customers.)
Here is a TurboTax FAQ for contacting customer support.
https://ttlc.intuit.com/questions/1899263-what-is-the-turbotax-phone-number
Yes, CMW38, you are absolutely correct! How depressing to hear the fix is temporary, but I am so grateful for the heads up. Maybe I can do the temporary workaround right before e-filing and it will work long enough to get the return sent to the IRS. I agree, this is something that Turbo Tax needs to fix ASAP. Thanks.
Thanks Macuser_22. I did report the problem to Turbo Tax a week or so when I first discovered it, and I spent two hours on the phone with them with minimal success. The agent escalated to a higher level agent, who tried to be helpful and confirmed that I was filling everything correctly, but then he talked to someone else who tried to explain it away with the new 10-year IRA distribution rule, which had absolutely nothing to do with my situation with an inherited IRA from a parent who died in 2011. When I had to start explaining the tax rules to them I figured it was a lost cause and gave up. He did say he would report it but I will try to call again with more information. Thanks.