Should prior year IRA distributions contribute to the year-end balance?

[Jacks-son]

When entering the year end (2018) value of all traditional IRAs, TT states that I must include any IRA distributions made the previous year (2017) and goes on to say, "The amount you enter must be at least the amount of your distributions." What role do previous year distributions have on the year-end balance of the current year?  For the past several years, my total TradIRA contributions have been reported as distributions on 1099-R when they are converted to my Roth IRA. Each year-end TradIRA balance is zero. Why must I include the amount of the distributions in the year-end balance?

[fanfare]

If you have a basis, yes the calculation is after your distributions in that year are added back in.

these are two separate line items and then they are totaled.

[fanfare]

a conversion to ROTH is not a distribution, so that amount would not be added back in.
See Line 7 Form 8606

[Jacks-son]

fanfare, thanks for your reply.  Your initial reply made me realize I was not thinking about reinvested dividends, interest, and capital gains as "distributions". I agree; one needs to take into account the reinvested distributions in determining account valuation.  I was holding my Form 1099-R, "DISTRIBUTIONS From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contacts, etc." in my hand while reading the TT interview text and I was focused on that distribution. That's obviously not the one the TT interview referred to.

I have to respectfully disagree with your second comment, that "a conversion to a ROTH is not a distribution".  I would assert that the Traditional to ROTH IRA conversion involves both a distribution, which may include taxable amounts, plus a reinvestment within 60 days.

[thomadon1]

Can anyone explain this issue to me as well? I’m seeing this years later but I’m having the same confusion as the original poster. 

I am doing a backdoor Roth and entering my IRA 2021 end of year value and it’s asking me “include any distributions you made in 2020. The amount you enter must be at least the amount of your distributions.”

Why is it asking about 2020 distributions? I am currently doing my 2021 taxes.

Thanks. 

[fanfare]

When you have a basis, for purposes of pro-rating the tax-free part  of a Traditional IRA withdrawal,

anything you took out [i.e. the withdrawal] , or converted, is added back to the year-end value of all your IRAs.

See Form 8606 Line 10.

The tax software will handle it.

[thomadon1]

Why is it asking about 2020 distributions on my 2021 taxes? I edited my above post. How does the 2020 distribution affect my year end value in 2021?

[thomadon1]

Also line 7 clearly states you don’t add back the conversion amount for Roth. 

[fanfare]

OK now that you edited your post, 

I see I didn't answer your question, nor the original question.

Sorry.

I'm thinking...

No, I don't see why that is relevant.

BUT,

I don't have TurboTax 2021 so I can't try this to see why it would ask that.

@dmertz would know.

[thomadon1]

Thanks no worries. To clarify I’m doing a backdoor Roth. I have no basis from 2020 or prior years. I have no money in my traditional ira as of 12/31/21. I’ve made no distributions in 2020 or 21 other than Roth conversions and a rollover so nothing that would count for 8606 line 7/distribution relevance. 

Hope that info clears up where I’m at. No matter what my entry on this screen is 0 for my 12/31/21 Trad IRA value but I can’t understand why it’s asking what it is. 

[fanfare]

Always print a copy of your completed tax return for your records, and review it carefully before e-Filing.
You will need it if you are audited by the IRS, or to amend if a TurboTax update changes your return or for any other reason,

AND, to find your AGI next year.

--

Don't file a return with an incorrect Form 8606,

or with any other incorrect form, for that matter.

[thomadon1]

I’m using TT deluxe with the CD also if that helps. 

[dmertz]

That paragraph in 2021 TurboTax telling you to include distributions made in 2020 makes no sense.

[thomadon1]

Should I assume it’s an error and actually asking for 2021 distributions? This distribution section in TT is asking about this so it can fill out line 7 for my 8606 correct? I just want to make sure I’m understanding what TT really wants. 

[dmertz]

TurboTax is asking for the information needed to populate line 6 of Form 8606.  Line 7 is populated from the 1099-R entries themselves.  That has nothing to do with any distributions.