Is there some reason TurboTax will not fill line 4 of Form 8606 for Nondeductible IRAs (contributions made from January 1 to April 15)?

[sulequan]

I entered the amount on the "Tell Us How Much You Contributed" online TurboTax Premier page under "Tell us how much of the above total contribution for 2018 you contributed between January 1, 2019 and April 15, 2019. (I'm preparing amended 2018 returns, but I just noticed TurboTax had not filled it on the original return.)

TurboTax shows the amount for line 4 of my Form 8606 but not my wife's.

Our traditional IRA contributions were not deductible, because my wife was covered by a retirement plan at work and our income exceeded the limit. We didn't want to make them deductible anyway, because we rolled them into our Roth IRAs (backdoor contributions).

I'm thinking about penning in the amount.

[dmertz]

Lines 4 through 13 and line 15 of 2018 Form 8606 are to be left blank if you made no distributions or Roth conversions from your traditional IRAs in 2018.  Presumably your Roth conversions were in 2019 and will go on your 2019 Form 8606, not on your 2018 Form 8606.

[sulequan]

Sorry, maybe I did not write it clearly - this was for 2018.

I am amending our 2018 returns. We made the non-deductible contributions to new traditional IRAs for 2018 in March 2019 and then immediately rolled them over to our Roth IRAs.

TurboTax shows my amount on line 4 of my Form 8606 but does not show my wife's amount on line 4 of the spouse's Form 8606.

[dmertz]

I changed the years in my answer to be one year earlier.

Presumably you had other distributions or Roth conversions from your own traditional IRAs in 2018 but your wife did not, resulting in line 4 of your Form 8606 being populated but line 4 of your wife's Form 8606 being blank.  If this presumption is wrong, you either reported a traditional IRA distribution or Roth conversion from your own traditional IRAs that you did not actually make or you failed to enter a traditional IRA distribution or Roth conversion from your wife's traditional IRAs that she did make.

(Note that distributions or Roth rollovers from a 401(k) or similar qualified retirement plan are not reportable on Form 8606 since 401(k)s and similar qualified retirement plans are not IRAs.)

[sulequan]

I took RMDs from traditional IRAs inherited from my parents. Since you indicated that could affect Form 8606, I was going to test if changing one of them in TurboTax to my wife would populate line 4 on her Form 8606 or if removing both of them would de-populate line 4 on my Form 8606.

However, just going through the screens again for those RMDs removed the amount from line 4 of my Form 8606. I must have missed specifying that I inherited them - the literal question was whether I inherited them from my investment firm (not whether the IRA distributions from my investment firm were inherited) and I really wasn't thinking, lol.

I haven't had time to research why that affects Form 8606. I did make the entire traditional IRA contribution between January 1 and April 15 of 2019, so shouldn't the amount show on line 4?

Thanks for your time and help! I really appreciate it.

[dmertz]

Distributions from inherited IRAs are not to be included on your own Form 8606 and indicating that the distributions are from inherited IRAs will cause TurboTax to automatically exclude them from your Form 8606.  If you made no distributions or Roth conversions from your own IRAs, Form 8606 line 4 should be blank.

The taxable amount of distributions from IRAs inherited from your parents must be calculated on a separate Form 8606 prepared outside of TurboTax and only the resulting taxable amount entered into TurboTax while preparing your tax return.  These inherited IRAs must be treated entirely separately from your own.

Despite the incredibly bad wording that makes the nonsensical implication that you inherited from an investment firm rather than from an individual and which confuses many people, TurboTax Product Quality has declined to change it.  The intent was to question identify the distribution about which the 'inherited' question is being asked, but fails miserably at conveying the intent of the question.  It's not clear why TurboTax even asks the question for anything other than a distribution from a Roth IRA since, for distributions other than from a Roth IRA, the code in box 7 provides all of the necessary information (unless the coding provided by the payer is incorrect, in which case the issue is with the payer, not with TurboTax).  TurboTax should be going by the code 4 when code 4 is present and not even asking if the distribution was from an inherited IRA.  You must answer Yes when asked this question in response to entering the forms for these distributions, otherwise TurboTax will inappropriately include them on your Form 8606.

[sulequan]

Sorry, I should look at the IRS instructions for Form 8606 again, but I still don't understand why line 4 of Form 8606 would be blank in my situation. It "simply" asks how much of my line 1 non-deductible contribution was made between January 1 to April 15, 2019. I made the entire contribution for 2018 in March 2019, so the amounts on line 4 and line 1 should be the same, in my mind.

Why would line 4 be affected by distributions or Roth conversions from my own traditional IRA (when it is only asking about what portion of the non-deductible traditional IRA contribution was made between January 1 to April 15, 2019)?

As I mentioned, in March 2019, after making the non-deductible 2018 contributions to our traditional IRAs, my wife and I did roll them over (which I assume is the same as converting) to our Roth IRAs (as 2018 contributions).

I'll have to look into what you wrote about calculating the taxable amount of distributions from the IRAs inherited from my parents on a separate Form 8606 prepared outside of TurboTax and entering that amount  into TurboTax. Where in TurboTax would one enter that? Does TurboTax give instructions on this? If I had correctly identified the distributions as from inherited IRAs and not calculated and entered the taxable amount, I guess you're saying that TurboTax would have failed to include that amount in my tax.

[dmertz · Accepted solution]

The instruction printed on Form 8606 above line 4 says not to make an entry on line 4 and any other following lines other than line 14 if there were no regular traditional IRA distributions or Roth conversions reportable on Form 8606.  Only lines 1, 2, 3 and 14 are used to record the addition to your basis.

If you had no regular traditional IRA distributions or Roth conversions reportable on Form 8606, line 4 is not used since it only pertains to calculating the taxable and nontaxable amounts of distributions and Roth conversions.

Your Roth conversions made in 2019 were reportable on your 2019 tax return and it's your 2019 Form 8606 that would need to show on line 4 any contributions made for 2019 in 2020.

The lack of any ability to help you calculate the taxable amounts of distributions from inherited traditional IRAs is one of TurboTax's shortcomings.  The only instruction provided by TurboTax is to calculate it yourself based on the same method as is implemented on Form 8606 for your own IRAs.  There cannot be any new contributions to an inherited IRA, so lines 1 and 4 will always be blank, making things a bit simpler.

[macuser_22]

Line 4 is unused if there was no distribution.

[sulequan]

Sorry, again. I didn't even look at anything above line 4, as I wasn't filling out the form line by line. Somehow I didn't notice those were instructions for continuing with or skipping line 4. Thank you!