topic 8915E Overstates Distributions on 1040 in Retirement tax questions

8915E Overstates Distributions on 1040

db9fan — Fri, 19 Mar 2021 16:44:56 GMT

When filling out 8915E, I noticed that on Form 1040, it shows the original distribution from 1099-R in addition to the amount filled in on 8915E. How do I get 1040 to reflect the repayment, and proper net distribution.

Re: 8915E Overstates Distributions on 1040

dmertz — Fri, 19 Mar 2021 16:54:55 GMT

Form 1040 line 4a or 5a should show the entire gross amount of the distribution but only, if the option to spread the income over 3 years is chosen, only 1/3 of the taxable amount of the distribution should appear on line 4b or 5b. Only the amounts on lines 4b and 5b affect the rest of your tax return.

However, if you chose to include the entire taxable amount on your 2020 tax return instead of spreading it in equal parts over 3 years, the entire taxable amount of the distribution will appear on line 4b or 5b.

If you repaid some or all of the distribution, you indicate that during the Form 1099-R and on Form 8915-E that is subtracted from the portion (all or 1/3) you otherwise chose to include on your 2020 tax return.

Re: 8915E Overstates Distributions on 1040

db9fan — Fri, 19 Mar 2021 19:50:01 GMT

Thank you!

Re: 8915E Overstates Distributions on 1040

fanfare — Fri, 19 Mar 2021 22:44:06 GMT

TurboTax Online does not calculate the correct taxable amount of a COVID_related distribution from an IRA with basis if the total distribution amount is over $100,000, whether you pay some of it back or not.

You can try it for yourself.

Re: 8915E Overstates Distributions on 1040

dmertz — Sat, 20 Mar 2021 01:58:03 GMT

fanfare, I see no problem with the calculation TurboTax does for a $120,000 traditional IRA distribution of which $100,000 is a CRD and the individual has $10,000 of basis and a year-end balance of $300,000. Both the online and CD/download versions give the correct result of $52,064 on Form 1040 line 4b.

Re: 8915E Overstates Distributions on 1040

fanfare — Sat, 20 Mar 2021 03:00:50 GMT

@dmertz

1) it asks twice how much did you pay back. how did you answer that?

2) it asks twice about how much of your distribution(different numbers) is COVID related. How did you answer that?

3)make the distribution $165,522 and the amount paid back $43,000

make the IRA value $3,000,000. keep that basis.

select three years.

Then see what happens

Re: 8915E Overstates Distributions on 1040

macuser_22 — Sat, 20 Mar 2021 03:38:43 GMT

@fanfare wrote:

@dmertz

1) it asks twice how much did you pay back. how did you answer that?

2) it asks twice about how much of your distribution(different numbers) is COVID related. How did you answer that?

3)make the distribution $165,522 and the amount paid back $43,000

make the IRA value $3,000,000. keep that basis.

select three years.

Then see what happens

I see what you mean, and I have not analyzed it fully, but at first look it seems to be a conflict in the IRS instructions for the 8606 form an 8915-E form - they both say to enter a different amount on the 1040 line 4b.

The 8606 instructions clearly say to enter the line 15b on the 1040 line 4b and the 8915-E say to enter line 19 on the 1040 line 4b. TurboTax seem to be following the IRS 8606 instructions.

I see nothing in any IRS instruction that says to ignore the 8606 and use the 8915-E instead, but I think that is what is intended by the law. (Otherwise paying it back and spreading over 3 years is meaningless).

(I will look at it further tomorrow and put together a case to be submitted as a bug report.)

Re: 8915E Overstates Distributions on 1040

fanfare — Sat, 20 Mar 2021 03:37:46 GMT

so far I have tried four tax packages, three online and one desktop

All four give a different taxable amount.

I believe one is correct, but it's not TurboTax.

Re: 8915E Overstates Distributions on 1040

fanfare — Sat, 20 Mar 2021 05:06:27 GMT

"The 8606 instructions clearly say to enter the line 15b on the 1040 line 4b and the 8915-E say to enter line 19 on the 1040 line 4b. "

even though it says "enter" not "include", when two forms reference the same line, you have to combine the amounts.

If you reduce the amount paid back to $30,000 there is a taxable COVID amount and a taxable unqualified amount from form 8606 line 15c (which does use the word "include"), not 15b, and the sum should be on 1040 line 4b.

Re: 8915E Overstates Distributions on 1040

macuser_22 — Sat, 20 Mar 2021 04:39:06 GMT

@fanfare wrote:

"The 8606 instructions clearly say to enter the line 15b on the 1040 line 4b and the 8915-E say to enter line 19 on the 1040 line 4b. "

even though it says "enter" not "include", when two forms reference the same line, you have to combine the amounts.

Where does it say that? The Intent of the new law and 8915-E form is that 8915-E amount be used and not the 8606 amount even though the IRS instructions do not explicitly state that.

Re: 8915E Overstates Distributions on 1040

fanfare — Sat, 20 Mar 2021 04:48:01 GMT

see my expanded comment just above.

I was quoting dmertz.

Re: 8915E Overstates Distributions on 1040

dmertz — Sat, 20 Mar 2021 13:35:30 GMT

@fanfare wrote:
@dmertz

1) it asks twice how much did you pay back. how did you answer that?
2) it asks twice about how much of your distribution(different numbers) is COVID related. How did you answer that?

3)make the distribution $165,522 and the amount paid back $43,000
make the IRA value $3,000,000. keep that basis.
select three years.

Then see what happens

If I enter a $165,522 traditional IRA distribution, indicate that the maximum permissible $100,000 was a CRD, indicate (in the only one place where I am asked if any of the CRD was prepaid) that I repaid $43,000, indicate that I had $10,000 of basis from prior years and a $3,000,000 year-end value in traditional IRAs, I see a correct taxable amount of $65,315 in both the online and CD/download versions of TurboTax. Note that I did not treat any of the repayment instead as a regular 60-day rollover (the deadline for which might have been extended depending on circumstances). Because of the repayment eliminating the entire taxable amount from Form 8915-E, the taxable amount of $65,315 ends up being entirely the result on Form 8606 line 15c, the taxable amount of the $65,522 that was not CRD.

Re: 8915E Overstates Distributions on 1040

fanfare — Sat, 20 Mar 2021 13:50:38 GMT

When I do it exactly that way i get a taxable amount of 22,130

I can't see the forms and don't intend to pay to see them.

Maybe my current account is stuck with old data and if I get motivated I'll try a new account and see what happens.

TurboTax Online has problems registering amount after EDIT/UPDATE.

That is a separate issue but may be causing my problem.

Re: 8915E Overstates Distributions on 1040

dmertz — Sat, 20 Mar 2021 14:06:36 GMT

I suspect that you've entered both a $43,000 60-day rollover and a $43,000 CRD repayment (indicating that you put a total of $86,000 back into the IRA). Click Tax Tools -> Tools -> View Tax Summary -> Preview my 1040 and see if you see a ROLLOVER indication on line 4b indicating that you reported a regular $43,000 rollover. Try deleting and reentering the Form 1099-R.

If the $43,000 was put back by the regular 60-day rollover deadline and would not result in a violation of the one-rollover-per-12-months limitation, you would probably be better off reporting that $43,000 as a regular rollover instead of as a CRD repayment. That would permit you 3 years to repay the full $100,000 CRD later instead of being able to repay only another $57,000 later.

Re: 8915E Overstates Distributions on 1040

fanfare — Sat, 20 Mar 2021 16:24:57 GMT

@dmertz

I was able to get rid of "Rollover"

I could not say I did not roll any over.

I had to say I rolled some over, and enter zero.

I still get a different taxable amount from the other package which I believe does it correctly. I can see those forms but not the TurboTax forms.

the difference is around $200.

I believe the reason may be the following.

Instructions for Form 8606 state:

"If you have distributions unrelated to qualified disasters, as well as qualified disaster distributions, you will need to multiply the amount on line 15a by a fraction. The numerator of the fraction is your total qualified disaster distributions and the denominator is the amount from Form 8606, line 7."

Some of the packages I tried did not calculate and apply this fraction.

Can you see if TurboTax (Online or download) is doing that?

I can't see the forms so I don't know, but right now I'm inferring it does not.

Thank You.

Re: 8915E Overstates Distributions on 1040

dmertz — Sat, 20 Mar 2021 16:57:08 GMT

TurboTax is definitely doing the correct fraction calculation that you quoted from the instructions for Form 8606 line 15b. I've performed this calculation manually to confirm each of the examples I tested. The fraction simply applies the basis proportionately between the CRD and the non-CRD parts of the distribution.

Re: 8915E Overstates Distributions on 1040

macuser_22 — Sat, 20 Mar 2021 17:10:10 GMT

@fanfare wrote:

@dmertz

I was able to get rid of "Rollover"

I could not say I did not roll any over.

I had to say I rolled some over, and enter zero.

I still get a different taxable amount from the other package which I believe does it correctly. I can see those forms but not the TurboTax forms.

the difference is around $200.

I believe the reason may be the following.

Instructions for Form 8606 state:

"If you have distributions unrelated to qualified disasters, as well as qualified disaster distributions, you will need to multiply the amount on line 15a by a fraction. The numerator of the fraction is your total qualified disaster distributions and the denominator is the amount from Form 8606, line 7."

Some of the packages I tried did not calculate and apply this fraction.

Can you see if TurboTax (Online or download) is doing that?

I can't see the forms so I don't know, but right now I'm inferring it does not.

Thank You.

Using the above figures, my 8606 15a is 164,999. (That is the $165,522 distribution minus $523 of basis).

Per the 8606 line 15 instructions line 15b would be:

164,999 X (100,000 / 165,522) = 99,684. The $99,684 goes on the 8915-R form line 13.

The part that I am having trouble understanding is why the taxable amount for 2020 is the 8606 line 15c ($65,315) and not the 8915-E line 19 (zero) since more than 1/3 was paid back and should not be subject to 2020 tax.?

Re: 8915E Overstates Distributions on 1040

dmertz — Sat, 20 Mar 2021 18:09:00 GMT

The amount that goes on line 4b is the sum of the amount Form 8606 line 15c and the amount on Form 8915-E line 19. The amount on Form 8606 line 15c is the taxable amount of the portion of the distribution that is not CRD and the amount on Form 8915-E line 19 is the taxable amount of the distribution that is CRD. The CRD repayment applies to the CRD portion on Form 8915-E, not to the non-CRD portion on Form 8606. To apply to the non-CRD portion the rollover must be a regular 60-day rollover, not a CRD repayment.

Re: 8915E Overstates Distributions on 1040

macuser_22 — Sat, 20 Mar 2021 18:29:56 GMT

Got it.