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Your Form 1099-R is correct as received. A Form 1099-R for a regular distribution from a traditional IRA is required to have the same amount in box 2a as box 1 and box 2b Taxable amount not determined marked. This is because all of your IRA accounts, possibly at different custodians, are treated as one large account for determining the taxability of any distribution and any one custodian has no way to know about any IRA accounts or contributions you might have made at any other custodian, nor does any custodian have any way of knowing whether or not you took a deduction on your tax return for any of your traditional IRA contributions. All of this means that it is entirely your responsibility to report to the IRS and track your nondeductible contributions and entirely your responsibility to determine the taxable amount of any IRA distribution that you receive.
Nondeductible contributions are required to be reported on Form 8606. Each Form 8606 that you are required to file because you made new nondeductible traditional IRA contributions or you received a distribution from a traditional IRA and you have basis in nondeductible contributions will build off of the previous Form 8606 that you filed.
Enter the Form 1099-R into TurboTax exactly as received under Wages & Income -> Retirement Plans and Social Security -> IRA, 401(k), Pension Plan Withdrawals (1099-R). After answering the immediate follow-up questions, click the Continue button on the Your 1099-R Entries page and answer the additional follow-up questions. TurboTax will ask you to enter your basis in nondeductible traditional IRA contributions from your most recently filed Form 8606 (which would/should have been filed in the '90s with your last nondeductible contribution, assuming no distributions from then through 2016) and your December 31, 2017 balance in your traditional IRAs. TurboTax will then calculate on Form 8606 the nontaxable and taxable portions of your IRA distribution.
Ok great explanation.
I did that and followed the instructions however.
I'm filing for 2019
I made contributions in 2019 to IRA (after tax money)
the turbotax is asking for form 8606 which I never filed and for IRA contributions on December 31, 2018 which was zero. All contributions were made in 2019 ... how can I avoid paying taxes again on this money?
Thanks for helping!
If you made a nondeductible traditional IRA contribution for 2018, you must file 2018 Form 8606 to report that, otherwise the IRS does not have to recognize that as having added to your basis in nondeductible contributions. Line 14 of that form will have the amount that 2019 TurboTax is asking for as your basis from years prior to 2019 and will put that amount on line 2 of the 2019 Form 8606 to be used in calculating the taxable amount of your 2019 distribution. If you made a 2019 traditional IRA contribution, you'll need to enter than separately in 2019 TurboTax.
Hope I'm allowed to join this 1099-r discussion. I received a 1099-r from my credit union for two normal distributions taken on my traditional IRA. I had tax withheld on one but not on the other. The 1099-r provided shows "0" in box 2a which causes TurboTax to recognize the distribution as " a prior year excess contribution" and TurboTax does not include the distribution in my taxable income. I believe the box 2s should have been left blank. I contacted the institution and requested a corrected 1099-r but they don't really seem to understand the issue nor do they believe the 1099-r is incorrect because "their system puts 0's in blank fields". In order to make the software correctly report this normal distribution, I have to leave box 2a blank which is inconsistent with my 1099-r. Is this a problem for me?
A Form 1099-R reporting a regular distribution from a traditional IRA must always have box 2a equal to box 1 and box 2b Taxable amount not determined marked.
PalmTree, what is the code in box 7 of the Form 1099-R?
Is the IRA/SEP/SIMPLE box marked on the form provided by the payer?
Is box 2b Taxable amount not determined marked?
Box 7 is a 7
IRA/SEP/Simple is X
box 2b is X
thanks
You are correct, the payer has provided an incorrect Form 1099-R. Box 2a should have the same amount as box 1 as required by the instructions for Form 1099-R for this type of distribution. I can't imagine how the payer could have made such a mistake unless the form was manually prepared, which would be odd if there was nothing unusual about the distributions. An automated system should not have permitted such an error.
I would contact the payer again and escalate to someone there who actually knows what they are doing.
I agree. I told the branch manager yesterday that I'm contacting their board of directors... ha. Thanks again
You could also contact the IRS as indicated in IRS Tax Topic #154:
I use Morgan Stanley for my financial advisors. When I received the incorrect 1099R I immediately called anfd requested a change.
NO way according to them. I should wait until May 31, 2021 for form 5498 to correct it.
Yes, the IRA/SEP/SIMPLE box is checked. Last year the C.A.R.E.S act allowed IRA distributions to be returned and discontinued for the year. I did so according to the letter. By August 2020, all the distribution money had been returned. However, MS still reported as money that is taxable.
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