Tax on IRA Distribution

[Norm1944]

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]

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?

[Norm1944]

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]

"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.

[Norm1944]

Thanks for your response.

5a has a 0, but 5b does have my entire pension benefit.

2a does have tax exempt interest.

I've checked my entry for the RMD several time and it is correct.

Everything else does look correct.

I'll recheck my input.  If I can't find an error, I will have to file.

I also called Turbo Tax help and they have no record of any bugs in the program.  Generally Turbo Tax is very good.

Thank you, if you do think of anything, please let me know.

[VolvoGirl]

If the full amount is on line 5b then it is all being taxed.  There must be another reason why you think your tax due is too low.  You must have enough withholding for something else to cover the tax.  What other income do you have?  Do you have a tax on line 16?  Do you have any withholding or credits that reduce the tax?

[Norm1944]

Again, Thank you,

I found my mistake.  I didn't enter the total IRA balance as of 12/31/2020 on form 8606.  Hence it was taking almost the entire basis out of the taxable amount.

Without your help, I would have just filed and I would have been hit with a penalty.