Inherited IRA: Caution: TurboTax is using basis for a non-inherited IRA held by same person.

[BillM223]

@GaryK30

I am glad that you found a workaround that works for you.

For others, please note that as dmertz and macuser_22 have noted elsewhere, the issue is that in this situation (two IRAs, one inherited), the basis for the two IRAs should not be conflated. Unfortunately, at present, TurboTax creates only one 8606, when it needs to create two.

I mention this because your results will change every time you run through the 1099-R interview, depending on which 1099-R you are working on and whether or not you left the 1099-R partway through whether it shows you the table of 1099-Rs and asks if you want to enter another one (as it turns out, this is not the end of the 1099-R interview).

Bear in mind that there is only one 8606 when you are re-running through the 1099-R, i.e., the basis will be the basis of the last 1099-R you did.

I hope this helps as you do workarounds to the issue.

[GaryK30]

@BillM223 

Yes, you are correct.

I had also read somewhere else that TurboTax has never automatically handled the cost basis for inherited IRAs, and that it only automatically handles the cost basis for traditional IRAs. In the past (2012-2019) TurboTax just set a cost basis of $0 on my inherited IRAs, possibly due to me answering that the person from whom I inherited the IRAs did not have non-deductible contributions. Unfortunately, in the 2020 version of TurboTax this is no longer the case, resulting in an incorrect taxable amount on the inherited IRAs.

I hope the case I opened is still active and that someone is actually working on it. If it's not fixed, many people may end up taking advantage of TurboTax's calculation guarantee when the IRS informs them later of the taxable amount error in their returns, which may be sizeable.

[GaryK30]

This is the message I got from Intuit today. Apparently they are not going to fix the problem, because they are not understanding the issue (I guess they didn't actually read this thread as I had asked them to do).  I don't need to file a Form 8606 for my inherited IRA, because I have no cost basis in this IRA. A Form 8606 was not filed in the past for my inherited IRA withdrawals.

"We appreciate your patience while we looked into your issue. After investigating the issue, we found that Retirement Plan Distributions Received from Decedents Other Than a Spouse (Form 8606): The preparation of Form 8606 from other than the taxpayer's or spouse's own IRA or Roth IRA account is not supported. If the traditional IRA has a basis, or the distribution is from a Roth IRA, then the taxable amount must be calculated manually on a Form 8606 for the decedent."

[dmertz]

Whoever provided that response completely misunderstood the problem.  Unfortunately, that's not uncommon when reporting true problems.  Because most of the "problems" reported aren't problems at all, those looking at a case are biased to believe that the problem report is bogus and have confirmation bias when they come across something that sounds related but really isn't.

It's possible that the actual problem is still being investigated, but there is really no way to know.  I imagine that problem tracking by TurboTax Product Quality this year has been pretty overwhelming due to the massive number of problems in newly added functions, as well as the inexplicably large number of problems such as the problem described in this thread introduced in areas where there should have been no changes at all.

[gattaca]

Growl  :(  Our  bottom line is TT is mucking up the taxable distribution of an inherited IRA.  The cost basis of $0 is the way we've found so far to make nullify the incorrect math.  I even posted pictures where TT is claiming number is fields that are not there.  

I guess when customers start filing claims for thousands of $ in math errors, they will "wake up" and actually read this thread carefully. Many people are going to not pay attention and go from filing for a refund to owing a fair chunk of change with this one error!  I sure did.   Hmm.. maybe we can all get TT to pay for this math error they say does not exist - What's their liability limit? 

The support team at Intuit better read, and re-read this thread carefully AND PLUG IN their own numbers from multiple 1099-R in an "inherited mode"... to see the problem.  Also, having made non-deductible contributions to a separate NON-INHERITED IRA just messes up the cost-basis of that IRA. This is a really basic math.  :(    Sorry, I had hoped for more than a canned response since we lead them right to the issues.   I think the problem needs to be escalated to 2nd or 3rd level support before the mad rush to file begins.     I'm still not sure I'll be able to e-File b/c of this error and the red !   Unbelievable. 

Stay safe, stay alive. Peace. 

[GaryK30]

When I zeroed out the traditional IRA cost basis, my return passed review and appeared to be ready to file. By zeroing out the cost basis, this gets rid of the unnecessary Form 8606. I don't see any forms with a red ! that require attention.

My situation is a withdrawal from an inherited IRA which has no cost basis, and no withdrawal from my traditional IRAs which have a cost basis (withdrawals not required yet). If I had to withdraw from the latter, my workaround of setting the cost basis to $0 would no longer work.

[gattaca]

10-4.  That should work in your case.  If you make non-deductible contributions to a separate, non-inherited IRA, you still must file 8606 for that IRA.  This is part of what is getting hozed up.  Hopefully, either TT will wake up and fix the issues or I'll be able to fiddle with the figures somehow on the raw forms to avoid the red !.  I know I saw one on my 8606 earlier.  :(  Stay safe, stay alive!  Peace. 

[macuser_22]

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@gattaca wrote:

10-4.  That should work in your case.  If you make non-deductible contributions to a separate, non-inherited IRA, you still must file 8606 for that IRA.  This is part of what is getting hozed up.  Hopefully, either TT will wake up and fix the issues or I'll be able to fiddle with the figures somehow on the raw forms to avoid the red !.  I know I saw one on my 8606 earlier.  :(  Stay safe, stay alive!  Peace. 

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If you edit the inherited IRS and check the box that YES this inherited IRS has,a basis and then check it back to NO basis, that seems to remove the false 8606 entry.    But if you revisit the IRA forms it can come back.   

Just be sure that it is  not on the 8606 when you file.

[GaryK30]

Yes, if you're still contributing to a non-deductible IRA, then my workaround won't work. I stopped contributing several years ago when I retired.

Hopefully someone at Intuit can fix this so it works like it did in TurboTax 2019, which at least worked properly for my situation and apparently for yours as well.

[GaryK30]

The other issue, that some have mentioned above, is that everything can look correct, but if you save and reload the return, or run the review process, the calculations change. Not good programming.

[JayB5]

Same problem here. I have a basis on my personal IRA that is apparently being used to reduce the taxable amount of my inherited IRA which has no basis. This results in an erroneous reduction in my income. As a result my return is rejected by the IRS when I efile. Since the program is making an error, I believe all of us with this problem are entitled to a refund from TurboTax for the cost of the program and any efiling charges. Perhaps if enough of us demand a refund, it might encourage a rapid fix of the problem, but if not, we can make the corrections described above (setting personal IRA basis to 0), print the forms, then change the personal IRA basis back to the correct number and reprint Form 8606 to actually mail in with the return.

[gattaca]

^^^ Absolutely correct.  It's not just TT gets the "Inherited IRA" basis wrong (should be 0 in most cases), they mingle and confuse the "Personal IRA" basis too with the "Inherited IRA" (no basis) . Any non-deductible contributions which must be recorded and carried forward on 8606 yearly are hosed up.  Without the 8606 records, those contributions will be taxable. 

I hope we can find a way thru maybe the "forms view" by checking the right boxes and overridding figures, while TT support continues to ignore the problem.  If we can at least get the #'s right and no red "!" we may be able to eFile without it kicking back errors.  Sometimes the eFile also does not like "over-rides" b/c it fails some of it's checks.   We know as long as there is any red "!" for sure will not eFile.  

This is the biggest math FUBAR I've encountered in TT, this late in the season, in decades. The Level1/2 Customer support ignoring this thread and not bothering to understand or re-create the problem is just  poor customer service.  This "bury my head in the sand" is NOT what customers are paying for when we purchase these versions.    

[GaryK30]

I suggest that everyone with some variation of this problem should contact TurboTax support to open a case, referencing this forum thread. Maybe if enough similar tickets get opened up they will understand there is a real problem.

[JayB5]

I have discussed with a representative at Turbotax. I was told the company is aware of the problem and anticipates a fix by March 5. 

[gattaca]

@JayB5  you just Made my day!   TY!     Stay safe, stay alive!  Peace.