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posted Apr 1, 2023 1:01:11 PM

TurboTax incorrectly considering "distribution of contribution" from Roth IRA taxable

In 2022, my wife contributed $6,000 to her non-deductible IRA, had some capital losses, and converted all of the remaining amount to a Roth IRA. Later in the year, she withdrew all contributions she had made to her Roth IRA in the last 4 years (including 2022). 

 

TurboTax correctly considers the withdrawals from the contributions prior to 2022 non-taxable. However, it completely ignores the Roth 2022 conversion, and considers that almost $6,000 of the withdrawal are earnings (surprisingly, it only charges penalty, but not taxes on this value). 

 

How can I address that? 

0 2 562
2 Replies
Expert Alumni
Apr 2, 2023 5:23:08 AM

Please make sure that the conversion is entered correctly:

 

  1. Click on "Search" on the top right and type “1099-R”  
  2. Click on “Jump to 1099-R”
  3. Click "Continue" and enter the information from your 1099-R
  4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
  5. On the "Review your 1099-R info" screen click "Continue"
  6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
  7. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

 

You should see the conversion amount included on line 24 of Form 8606. Please follow these steps to view Form 8606 (you might be asked to pay first):

 

  1. Select Tax Tools on the left and then Print Center 
  2. Select Print, save or preview this year's return
  3. Select Federal return
  4. Sroll down to Form 8606

 

 

If this doesn't solve your issue it might be helpful to have a TurboTax ".tax2022" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

 

  1. From the left menu select Tax Tools. 
  2. Then select Tools below Tax Tools. 
  3. A window will pop up which says Tools Center.  
  4. On this screen, select Share my file with Agent. 
  5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
  6. Reply to this thread with your Token number and tag me @DanaB27. This will allow us to open a copy of your return without seeing any personal information.  

 

 

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

Level 15
Apr 2, 2023 8:12:03 AM

The result suggests that the Roth conversion is at least partially taxable.  Perhaps you have not yet entered your wife's nondeductible traditional IRA contribution for 2022 (or, if the contribution was made for 2021, you did not report the nondeductible contribution on the 2021 tax return so that the basis in nondeductible traditional IRA contributions would carry forward to 2022).

 

Examine the IRA Information worksheet to see your wife's basis in contributions and conversions.

 

Examine Form 8606 to see the calculation of the nontaxable and taxable amounts of the Roth conversion.  If any of the Roth conversion is taxable and your wife was under age 59½ at the time of the distribution from the Roth IRA, any part of the distribution attributable to taxable Roth conversions held less than 5 years are subject to the 10% additional tax, but not income tax.