Tax on IRA Distribution

Forum|Forum|5 years ago
April 23, 2021
6 replies
30 views

Turbo Tax computed the tax on my IRA distribution at about 25% of the actual distribution, why? I don't qualify for disaster distribution and the basis is significantly lower than the amount not taxed.

BillM223

Level 15

Are you under 59 1/2? What was the distribution code in box 7 on the 1099-R?

It sounds like you were hit with a 10% penalty on top of the regular federal income tax.

Can you see if you have a form 5329?

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Norm1944Author

Level 2

Thank you for your response.

I'm 76 years old and I don't think I was hit with a penalty.

The entire distribution should be taxable, however it's only allowing about 25% as the taxable amount. The the remainder is non-taxable

I do have a form5329, but there's a small basis carry over from 2019.

I took both and RMD and and Additional distribution.

I don't know if that helps, but thanks.

I'm more concerned about being hit with a due bill and penalty. I'm also reluctant to override Turbo Tax. They have to be a lot smarter than me.

BillM223

Level 15

"The entire distribution should be taxable, however it's only allowing about 25% as the taxable amount."

Oh, I misunderstood you. I thought you were saying that the distribution was being tax at 25%, not that only 25% of it was being taxed.

And how do you know this? Is the amount in line 5b on the 1040 much less than the amount in line 5a?

OK, is there an amount in box 2a (Taxable amount)?

If not, did you used the Simplified Method to determine the taxable amount?

If so, are you confident in the information you entered about starting date of the pension/annuity, the original plan cost (amount of after-tax contributions made to the pension while you were still working), and the amount of plan cost that has already been recovered? The answers to these questions determine the taxable amount, if you have after-tax contributions in the plan. Do you understand the other questions as well?

You are wise to be concerned. TurboTax is DIY software. While we provide a guarantee on the accuracy of the tax calculations, you are responsible for any errors arising out of bad input. So, please continue to review your return and ask questions so that you understand why it is doing what it is doing.

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