Entering a nondecutible IRA contribution is decreasing my refund

[EdJJJ]

I entered all my info for my 2022 federal return and have a refund of about $4,200.  yay

Then I remember that in 2014 I put $6,500 in an IRA thinking it would give me a tax break at that time.  Wrong, what was I thinking?  I was participating in an 401K in 2014.  The $6,500 was taxable, Turbotax walked me through including a 8606 with my 2014 return.

I retired in 2021 and took my first traditional IRA distribution in 2022.  I had already entered the 1099R for that distribution.  So I go back to the 1099R Entires and follow the wizard and I indeed get prompted with the question "Any Nondeductible Contributions to your IRA?"  This time I answer YES.  The cost basis auto-populates the $6,500 from the 8606 from 2014, Turbotax remembered that.  Then I am asked to enter my IRA balance as of December 30, 2022.  Done - My $4,200 refund is now $3,330!  Was it not suppose to decease my taxes?

If I go back to"Any Nondeductible Contributions to your IRA?" and say NO, my refund goes down to $3,200.  If I do it again, and answer Yes, it goes back to $3,330.  What happened to my $4,200 refund?

So I created a new return and entered all my income.  And sure enough, as soon as I say yes to"Any Nondeductible Contributions to your IRA?" about $1000 of my refund disappears.  Any idea what might be going on here?   Thanks.

Does anybody have an idea why this would be happening?

[fanfare]

Does anybody have an idea why this would be happening?"

The evolving refund you see is not meaningful until your return is complete in all respects with all questions answered truthfully.

@EdJJJ 

[MarilynG1]

Entering your previous Non-Deductible IRA Contributions Basis would not affect your tax return.  There must be something else that decreased your refund.  Since we can't see your return in this forum, it's hard to say what that might be.  

If you're using TurboTax Online, go to Tax Tools > Tools in the left-side menu, then click on 'View Tax Summary' on the pop-up menu.  Then, back at the left-side menu, click on 'Preview my 1040'.  Scrolling through this may give you a clue. 

Here's more info Non-Deductible IRAs.   You can Contact TurboTax Support for help from someone who can look at your return. 

[dmertz]

When you answer No, TurboTax silently deletes your basis in nondeductible traditional IRA contributions.  You'll have to reenter your basis.  If after doing so TurboTax prompts you for an explanation of an adjustment to your basis, to get you basis back properly you'll need to clear you tax return as start over in the online version or begin a new tax return in the CD/download version.

[EdJJJ]

this was my last entry before submitting my return.  It was a bit of an after though, because I had forgotten about the IRA after tax contribution from 2014.

[EdJJJ]

Hi Marilyn,

I am using the desktop version.

My understanding is that being I paid tax on the IRA contribution in 2014, by entering the nondeductible IRA contribution when withdrawing that I would avoid being taxed twice.  Is that not the case?   Is there any scenario where entering a nondeductible IRA would increase your income tax?

[dmertz · Accepted solution]

Until you enter you year-end balance in traditional IRAs, TurboTax calculates an erroneously high nontaxable amount of your traditional IRA distribution by assuming that the year-end balance is zero.  Once you enter the year-end balance, TurboTax recalculates Form 8606 Part I and produces the correct, lower nontaxable amount, your AGI goes up to the proper amount and your tax refund decreases accordingly.