Form 8606 Non deductible IRA tracking

[wmeskill]

I have been using Turbotax for 10 years.  I thought Form 8606 was supposed to track your total basis in traditional IRAs by adding to line 2 each year.  Why doesn't Turbotax include the previous years contributions?

[ldnelsonhas1]

Where in TurboTax is the 8606 form?

[macuser_22]

@ldnelsonhas1 - The 8606 form is automatic if you need it.

You don't normally enter a 8606 itself.  It is automatically created when:

1) You make a new non-deductible Traditional IRA contribution.
2) You take a distribution from a IRA that has a after-tax "basis".
3) You make a conversion of a retirement account to a Roth IRA

If none of those occurred, then the last filed 8606 remains in effect

There are some circumstances when a 8606 must be files for other reasons and might require filing a stand-alone 8606.

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/1899503-what-is-form-8606-nondeductible-iras-used-for">https://ttl...>

[dmertz · Accepted solution]

TurboTax does.  However, it's all too easy to cause TurboTax to silently discard the transferred-in basis information by inadvertently answering No when asked if you made any nondeductible traditional IRA contributions.  Once discarded, the historical information is gone.  The only way to recover the information is to either manually reenter the amount or to start the tax return over and transfer in the historical information again.

[Critter]

The only years you need to have a 8606 in the return is when you add non deductible contributions or you take distributions.  Keep a copy of the most current 8606 in with your IRS paperwork so you have that info when you take out distributions later.

[dmertz]

Good point.  TurboTax carries the historical information on the IRA Information Worksheet and uses the current basis total from that worksheet to populate line 2 of the current-year's Form 8606 *if Form 8606 Part I is needed* to report new nondeductible contributions not rolled over or you have made distributions or conversions from your traditional IRAs.

[clsale1999]

I'm curious why TurboTax would ask you if you still have non deductible IRA contributions from previous years.    If you have a IRA distribution they become part of the tax calculation.  If you don't have a distribution you still have a basis in your IRA which can be used in future years for future IRA distributions.       Non Deductible don't expire.  The correct way to handle these would be similar to Long Term Capital Loss Carry Forwards.  TurboTax doesn't ask you if you still have LTCL Carry Forwards. It carries them forward and uses them when applicable.  By allowing you to inadvertently discard non deductible IRA contributions TurboTax costs you money since you will pay taxes on these distributions which should be tax free.  TurboTax should correct this deficiency in their software.

[dmertz]

I agree.  It's a complaint that in the past I've made to the moderators to pass on to the product quality folks.  However, I don't think Intuit chose to consider this to be TurboTax behavior that needs modifying.  My suggestion to them was to at least add a confirmation page when TurboTax is about to delete the basis.

[Critter]

ALWAYS print the latest copy of the form 8606 and the contribution worksheets   and  keep them with your IRA papers for quick reference in the future.  NEVER rely on a program to keep this important info for you.

[dwood003]

clsale1999 identified the problem precisely as I described it today, Turbo Tax expert was totally unaware that it existed. I filled out the Form  8606 in 2008 and every year since  the taxable  amount was calculated by the App. wasted 2 hours and I have to go thru 8 years of tax returns to figure my basis.

[asc]

I just ran into the same problem described above.  TurboTax's handling of Traditional IRA Basis needs to be fixed.  I just discovered that they dropped the 8606 from several years even though they created the worksheet.  

This year I found an interview to enter explanations for the Basis discrepancy, but then they merged both my and my spouse's explanations into one combined basis that adds both out numbers together, even though spouses' IRA Bases should never be combined.  And it then gets included this combined mess in the Tax return as a "Blank Form".

[macuser_22]

@schoenba - You cannot combine basis.  You only need a new 8606 if there is new non-deducible contribution or a distribution, otherwise the last filed 8606 remains in effect.   You would only get a "combined" basis if you failed to select the spouse that the Contribution or distribution  was for.  TurboTax used the spouse check box to produce either a 8606-T (Taxpayer or first person listed on the tax return), or 8606-S (Spouse or the second taxpayer listed on the tax return).

[asc]

Thank you macuser_22 --  I know you cannot combine basis and they should never be combined, but that is exactly what TurboTax did so it's clearly a bug.  I was trying to correct my basis which was zero since TurboTax had dropped reporting the Form 8606s the last few years.  I was using TurboTax's interview for non-deductible Traditional IRAs where it displays the Basis it has from the prior year's  and asks you to revise it.  If you do, it then asks you to provide an explanation in a line-by-line format with associated numbers.  I did this and checked the Forms and I now had a new "Blank Form" with my entires.  Then I did my Spouse's corrections and was surprised when the explanation entry form already had my entries in it.  When I added a new entry for her it got added to the total.  Note - that I did not have a 2017 contribution while she did, so she will have a form 8086 but I won't.  I would be happy to repeat this error with someone from TurboTax if I could figure out how to reach them (email or phone).

[macuser_22]

If you can give me the step-by-step procedure that creates the problem I can report it.  I don't know what you mean by a "blank" form.  If yiu are only entering the basis and do not actually have a non-deductible contribution then it should only store the historical basis in the IRA Info Worksheet - no 8606 should be created.

[dmertz]

TurboTax uses its Blank Form to provide a form on which to prepare your explanation for adjustment to basis.  TurboTax only supports a single Blank Form, so you'll simply to enter each explanation in a separate paragraph on this form.  Do *not* put dollar amounts in the Amount column.  To avoid any meaningless summing of the amounts, report any dollar amounts in your explanation text.