Questions re: IRA Worksheet and # transferred from there to Form 8606

[ArchesNationalPark]

Son contributed $1657 to Roth 401k at work 2021-2023 and $39 in 2024. These are his only Roth 401k/Roth contributions ever. In 2024, employment ended and he rolled over all of this $ to a Roth at a brokerage. The shares had lost some value so the amt rolled over was $1508. He also rolled over his Employee Deferred account from the same employer. He had contributed $54 and the employer matched $83 (this actually was the match for Deferred and 401k but they put it all in Deferred).  Total rollover value for the Deferred account was $128. This went into a Traditional IRA at the brokerage and as soon as it cleared, we converted it to Roth. In 2024, he took a $300 withdrawal from the Roth at the brokerage to pay his bills. This is the only w/drawal he's ever done from a Roth. He had an Roth open on 12-31-24 and had IRAs less than 5 yrs. 

I have entered all this info, but there appears to be something wrong on the IRA form worksheet. The values of $1657 (Line 23), $39 (Line 33), $1508 (Line 34), $128 (Line 35), $300 (Line 38), and $128 (line 59) all appear to have correctly carried over onto the worksheet. However, the number for Line 6 shows $3204 ($1657,+$1508,+$39). This doesn't seem right since the $1657+$39 (contributed) and $1508 (what contributed $ was worth when rolled to Roth) are the same $. 

A similar problem appears on Line 51. It shows $2904, which appears to be $1657 (his contribution at work 2023 & prior)+$39 (his contribution at work 2024)+$1508 (the amt of the $1657+$39 that was rolled over from 401k Roth to Roth-lower than what he put in due to loss of share price)+ $300 he withdrew. 

In both places (and also Line 22 on Form 8606), it seems to be counting his contributions twice. Once when he contributed them from his paycheck and then again when his job ended and he rolled that money to a brokerage Roth (with a little loss in principal due to market variation). It looks like one problem on the IRA Worksheet may be the $1508 should come off on line 60, but it isn't.  How do fix these amounts in all three places? Thank you for any and all help!

Also, it is showing that the $300 he took out of the Roth is not taxable and no penalty.  It is withdrawal from contribution (not earnings) so no tax, but should there be penalty?

Arches

[dmertz · Accepted solution]

The amount on line 6 of Form 8606 is a user-entered value.  If it's wrong you can go back and change what you originally entered.  Line 6 is to be the sum of the year-end balances of traditional IRAs only, not Roth IRAs.  From the transactions that you mentioned, it seems like balance in traditional IRAs at year-end would have been zero.

Also, it seems like the rollover to the Roth IRA and the conversion to the Roth IRA were separately entered as ordinary Roth IRA contributions under Deductions & Credits.  Nothing about the amounts rolled over or conversed is to be reported under Deductions & Credits.  These are to be reported only in the section for entering Forms 1099-R.

Nontaxable amounts distributed from retirement accounts are not subject to penalty.

[ArchesNationalPark · Accepted solution]

Thank you for the info! I deleted the 1099Rs, IRA Contrib Wks. and IRA Info Wks and re-entered the 1099Rs. Plus went through the IRA section and responded to questions regarding contributions, etc. I didn’t enter anything directly on any forms.

That fixed the problem on Form 8606 (yes it’s $0), but the numbers on the IRA worksheet for lines 6 and 51 did not change. Line 8 is the same as Line 6. These numbers still include the original 401k contributions and that same money again (less some loss in share price) when it was rolled over to a Roth IRA.

It shows Line 6 is the sum of Lines 23, 33, and 34.  Line 34 shows the $1508 coming from 1099R Summary, line 26c. The info for line 26c says "This is the amount rolled over from a designated Roth account (Roth 401(k) or Roth (403(b)). For the taxpayer, this is the amount in Box 5 on the Form 1099-R Worksheet for a distribution entered with either code "B" with rollover into a Roth IRA checked, or a code "H", on the Form 1099-R Worksheet.”  My son's 1099R shows code H.

Line 6 is from Line 51. Line 51 is from: In the Taxpayer column, the amount on line 23 as adjusted on lines 61 and 73 plus the amount on lines 33, 34 and 37, minus the amount on line 38

Wondering how to fix these numbers. Lines 23 and 34 are the same money (less some loss in share price). Should one of these be deleted?  Should I use override? Should I ignore the errors because they won’t matter in the long run?   Any suggestions would be greatly appreciated.

[dmertz · Accepted solution]

Perhaps I misunderstood.  I thought you were referring to line 6 of Form 8606.

If line 23 of the IRA Information worksheet includes the same money as does line 34, I suspect that the amount of Roth 401(k) contributions was mistakenly entered when asked how much was contributed to Roth IRAs for years prior to 2024.  A Roth 401(k) is not a Roth IRA.

[ArchesNationalPark]

When I initially posted, I did have a question re: 8606 bc the # was incorrect. You mentioned this is a user entered number so I deleted all the 1099Rs and two IRA worksheets and re-entered the 1099Rs. The problem on 8606 went away. I must have made some error the original time I entered them. 

Your suspicion was correct. The IRA info worksheet does say to include 401k rollovers, but I missed that I was only to include the ones prior to 2024. There were not any prior to 2024. Removing that amount fixed everything. Thank you so much for your help and your willingness to keep helping me until I got it right.