when i enter ira value why does it increase tax due calculation

[JamesG1]

A Traditional IRA distribution generally includes a taxable portion which will increase the Federal tax balance due.  If the 1099-R does not withhold sufficient Federal withholding tax, your net refund will be reduced or income tax balance increased.

If you received a Traditional IRA distribution and it is reported on IRS form 1099-R, it will be entered into the TurboTax software as an income item.

 Box 1 lists the gross distribution.  Box 2a lists the taxable amount of the gross distribution.

If box 2b taxable amount not determined is checked, you may have to compute the taxable portion of the gross distribution.

[dmertz]

When you have basis in nondeductible traditional IRA contributions, the year-end value of your traditional IRAs is necessary to accurately prepare Form 8606 to determine the taxable amount of a traditional IRA distribution.  Until the value is entered, TurboTax assumes a $0 year end value and the calculation produces an inaccurately low taxable amount.

The year-end value in traditional IRAs is also needed if you have an excess contribution in your traditional IRAs.  The 10% penalty is calculated on the amount of the excess or on your year-end balance, whichever is less.

[Brad999]

I also had the same experience, but I have a taxable amount in Box 2a.  The program just seems to ignore it.  I have after-tax contributions to be reconciled and that value was entered.  The amount the tax increased doesn't jive with the idea that the value of the IRA was assumed to be $0 before I entered it.

[dmertz · Accepted solution]

The amount in box 2a of a Form 1099-R reporting a regular distribution from an IRA is meaningless, indicated by box 2b Taxable amount not determined being marked.  For a traditional IRA distribution, if you have indicated that there is no basis in nondeductible traditional IRA contributions, TurboTax knows that the amount in box 1 is to be used as the taxable amount.  If you have indicated that you do have basis in nondeductible traditional IRA contributions, TurboTax knows to determine the taxable amount by preparing Form 1099-R Part I using the amount in box 1, the amount of your basis and the year-end value in your traditional IRAs.

Review the Form 8606 prepared by TurboTax to see the calculation of the taxable amount.