Tell Us the Value of Your Traditional IRA

[jhbrown42]

I have a traditional IRA, a Rollover IRA (rolled from a 401k), an inherited IRA, and a Roth IRA (all at Fidelity).  In 2023, I took the RMD from the inherited IRA.  I also did a Roth conversion from my Rollover IRA to my Roth.  I understand those amounts are taxable.  What I don't understand is why TurboTax is asking me this question.  TurboTax says get the info from my 5498.  But I got a 5498 for my inherited and Roth, I did not get one for my rollover or traditional.  So I can't get the year-end value of my traditional from a 5498.  BTW, I saw an answer here from 2021 that said if you did not make non-deductible contributions, you would not see this question, but I have told TurboTax that I did not make non-deductible contributions for all of these IRAs.  I can figure out the year-end value of my traditional IRA, but the fact that it wants this number makes me think I made a mistake (or TurboTax has a bug).

[dmertz]

"TurboTax says get the info from my 5498."

No it doesn't.  You have to enter the amount.  Enter only the total of the year end balances in your own traditional IRAs (rollover, SEP and SIMPLE IRAs are all traditional IRAs).  do not include the amounts in any Roth IRAs or in any inherited IRAs maintained for you as beneficiary.

The IRA custodian was required to provide the year-end values for all of your IRAs in January on your year-end statements, so that's where you'll obtain the values for accounts for which they were not required to send you a Form 5498.

[jhbrown42]

Forgive me for paraphrasing.  I'd correct what I said about the 5498, but I can't get back to that screen.  No matter.
1) My main question is why TurboTax needs that number.  I didn't think it would have any impact at all on my taxes, but maybe it does.  If so, I'd like to know how.  If not, I'd suggest that maybe the program be improved so I don't have to go look up numbers that are not going to be used.  And I wouldn't have to wonder what IRA balances to include.  To wit,

2) I found some in-program help for that line.  It says "Enter the total value of ALL of your traditional IRAs, including SIMPLE IRAs, as of December 31, 2023."  When you click on the hyperlink for "traditional IRAs", it says "A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA".  So by my reading, that would include inherited IRAs (it's not an inherited Roth).  Your answer says not to include inherited IRAs.  Which is correct?

[dmertz · Accepted solution]

If you made no excess traditional IRA contribution and made no distributions from a traditional IRA while having basis in nondeductible traditional IRA contributions, TurboTax has no need for this value to prepare your tax return.

TurboTax's guidance is often rather incomplete, as in this case, often leaving out important details that don't apply to the majority of filers.  Unless the IRA was inherited from your spouse and you chose to treat it as your own, making it your own IRA, it's not to be included in the total value of your own IRAs when TurboTax asks for this value.  If your participate from whom you inherited the IRA had basis in nondeductible traditional IRA contributions, you'll need to include the year-end value of  that IRA on a separate Form 8606 prepared outside of TurboTax when determining the taxable amount of a distribution from the inherited IRA.

[GJKOZAK]

When I enter the value of my Traditional IRA in response to this question, my Federal Tax Due goes up.  Do you know why this is the case if that money is in the IRA and is yet to be withdrawn / taxed?

[DaveF1006]

It depends. It sounds like you made taxable distributions for the year. Tax law requires that the basis in the IRA must be pro-rated between the 2024 distribution(s) and the remaining IRA value which is the aggregate total of all existing Traditional, SEP and SIMPLE IRA accounts on Dec 31, 2024.

You can NEVER withdraw ONLY the nondeductible part - it must be prorated over the entire value of ALL Traditional IRA accounts which include SEP and SIMPLE IRA's. (For tax purposes you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together).

TurboTax will ask for your non-deductible "basis" and then the *Total Value* of *all* Traditional IRA, SEP and SIMPLE accounts as of Dec 31, of the tax year. That is so the prorating of the basis can be properly proportioned between the current years distribution and the remaining IRA value. That is done on the 8606 form.

[user610]

I made a non-deductible contribution to my traditional IRA in November 2024, which I then converted to a Roth IRA that same month. At the time of the contribution, the total amount in my traditional IRA was $0.

In December 2024, I rolled over a 403(b) to my traditional IRA. My end-of-year value for my traditional IRA was  roughly amount of my rollover, and my federal taxes increased when I entered this amount in TurboTax.

It looks like TurboTax is pro-rating the taxable portion of my conversion based on the end-of-year amount, although there were no pre-tax dollars in the account when I completed the conversion. Should I enter $0 as the end-of-year amount instead, or is this accurate by TurboTax?

Thank you for your guidance!

[fanfare]

Your action to add funds at the last moment causes a problem for you , namely prorating of the taxable amount of the conversion.

[dmertz]

As fanfare implies, the relative timing of the conversion and the rollover has no bearing on the calculation of the taxable amount.  The calculation is done based on the combined year-end value of all of your traditional IRAs, not the value at any other time during the year.  You are required to enter the actual year-end value and only a portion of the conversion will be nontaxable, with the reminder of your basis staying with your traditional IRAs to be applied to future distributions until you have no more funds in traditional IRAs at year-end, at which time all of your remaining basis will have been applied.

[user610]

Thank you for the response!