nondeductible ira contribution

Forum|Forum|3 years ago
February 12, 2023
2 replies
23 views

In 2022 I made a nondeductible ira contribution for 2021. After filing taxes in 2022 I received a form 5498 for 2021. I didnt do anything with this form other than keep it with my taxes.

This year, 2022, TT askes about non deductible contributions and filled in the amount from the 8606 and asks for the value of all iras from a 5498 (which is not the total of all my iras). However, the only 5498 I received was for 2021. I did not make a contribution for 2022.

When I put in the value of my iras, my tax burden increases. I don't understand why my taxes are increasing.

I also did convert a substantial amount from a traditional ira to a roth, but TT had already determined the taxes owed for that conversion prior to asking about the nondeductible contribution.

I can't seem to find a reason anywhere as to why my tax burden is increasing.

Best answer by DanaB27

Yes, you will have to include the value of all your traditional/SEP/SIMPLE IRAs on December 31, 2022.

Before you entered the value of all the IRAs TurboTax had only the basis and calculated the tax as if the IRAs were empty. Once you entered the correct value of all of your IRAs TurboTax was able to calculate the correct taxable amount. Usually, it is best to ignore the refund amount until everything is entered.

Since you had pre-tax funds in your traditional IRA the pro-rata rule applies. This means that with each distribution/ conversion, you will have a taxable and nontaxable part. You can see the remaining basis on line 14 of Form 8606, this basis can be carried forward. Therefore, each distribution/conversion in the future will have a taxable and nontaxable part until the basis is all used.