For Roth Conversion handling by Alabama, The TT screen "Some or All of Your Distribution is Taxable" has two boxes with a big "OR" in between. Why does TT fill both?

[murray1723]

To further clarify, in 2020 I put zero in the box "Taxable Pension or IRA" and left the box "Taxable Roth IRA Conversion" filled with my conversion amount.  This seemed reasonable given the big "OR" between the two boxes.  The effect was that TT did not include my conversion amount in my taxable income for Alabama, and I fear I correspondingly significantly underpaid my taxes.  For 2021, TT populates both boxes with the conversion amount, even though the big "OR" between the two, and my Alabama tax is correspondingly much higher.  Which approach is correct?  From what I read, the Roth conversion is taxable by Alabama, so populating both boxes with the conversion amount seems correct, but the form is certainly confusing.

[DanaB27]

Generally, conversions are taxable unless you had a basis in your traditional IRA. If you did not have a basis and the conversion will be 100% taxable then both boxes should have the full amount entered.

I'm not sure why they made the entry screen confusing but wanted to confirm that you enter the full amount in both boxes when you have a fully taxable conversion to get the correct result on Form 40.

[jaydubya]

I'm using a backdoor Roth and encountered a problem with this.  I entered the full amount for taxable amount (just like in 2022) but TT thinks I owe taxes on the full distribution instead of subtracting the 2023 non-deductible contributions from total distributions.  This worked in 2022.

[ALRoth]

TT definitely has a calculation problem with schedule RS for 2023 for Alabama.    You are the at least the 3rd person to notice, but I haven't found a way to report it. 

[jaydubya]

I think TT has done a terrible job with the questionnaire. For my case of a Roth conversion, I think the proper answers should be:

taxable pension or IRA: 0

taxable Roth IRA or conversion: distribution - non-deductible contribution

The forms make these entries clear.  Checking “Pen Exc Wks” and”Schedule RS” after using these values shows exactly what I would expect. For a Roth conversion, I do not have a taxable distribution. I do have a partially taxable Roth conversion. 

TT should have done this for me based on the 1099R and the basis calculation that was performed for my federal return. 

[DanaB27]

It would be helpful to have a TurboTax ".tax2023" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

The instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@jaydubya 

@ALRoth 

[jaydubya]

Thanks for the instructions.

Token number 1197303

[DanaB27]

Thank you, I reviewed your return. It seems like you were able to fixe the issue by correctly entering only taxable part on the “Some or All of Your Distribution is Taxable” screen during the Alabama State interview:

1. On your Alabama return click “Update” next to Income.
2. Continue until the “About your retirement” screen and click "Edit”.
3. Continue to the “Some or All of Your Distribution is Taxable” screen and edit the amount next to Taxable Roth IRA conversion.

Please review your entry for the taxpayer's traditional IRA to Roth IRA conversion, you entered $2 but the taxpayer's Form 8606 line 18 show $4 as taxable.

@jaydubya 

[jaydubya]

Thanks for the review.  I had to manually supply the taxable conversion amount because TT did not handle this automatically like it did for my federal return.  Likewise, I had to manually enter the taxable distribution amount as well which TT should have handled.  I have two IRAs that were converted.  One has $2 taxable distribution and the other has $4 taxable distribution.  

[DanaB27]

I reviewed your return again and both Form 8606 (for taxpayer and spouse) show $4 on line 18 as the taxable amount for the conversions. 

@jaydubya 

[blthomps13]

Token 1202484

[DanaB27]

Thank you, I reviewed your return. You will have to edit your entry on the “Some or All of Your Distribution is Taxable” screen during the Alabama State interview. Your Form 8606 line 18 show $65 as taxable, therefore, you need to enter $65 next to "Taxable Roth IRA conversion".

1. On your Alabama return click “Update” next to Income.
2. Continue until the “About your retirement” screen and click "Edit”.
3. Continue to the “Some or All of Your Distribution is Taxable” screen and edit the amount next to Taxable Roth IRA conversion ($65).

@blthomps13 

[blthomps13]

Thank you!!! I felt like that was the correct way to do it, but the software kept listing the entire amount , and I could not figure out what I had done wrong/how to get it to change without doing it myself. 

[LuvMexicoBeach]

On the "Some or all of your distribution is taxable" page for the AL Return page:  I had about $70,000 withdrawn from my traditional IRA of which $50,000 was converted to a ROTH IRA and the remaining $20,000 went to cash.   So do I put $70,000 in both Taxable IRA and Taxable ROTH Conversion, or do I put $70,000 in the Taxable IRA and $50,000 in the Taxable ROTH Conversion?