topic IRA Basis in Retirement tax questions

IRA Basis

NormViste — Tue, 18 Feb 2025 03:51:33 GMT

TurboTax has not deducted IRA Basis from 1040 IRA distributions, line 4a and 4b, to get taxable amount. How can I fix that?

Re: IRA Basis

DavidD66 — Tue, 18 Feb 2025 04:10:48 GMT

Can you clarify please. What form are you referring to with 4a and 4b?

Re: IRA Basis

NormViste — Tue, 18 Feb 2025 04:18:12 GMT

As I said, 1040.

Re: IRA Basis

DavidD66 — Tue, 18 Feb 2025 04:43:12 GMT

You don't deduct the basis in an IRA to get to the taxable amount. A distribution from an IRA that has both pre-tax and after tax contributions is a combination of both. For instance, if you had an IRA with $20,000 of after-tax contributions (basis) and $80,000 of pre-tax contributions and gains, then a distribution from the account would be 20% basis and not taxable, and the other 80% would be taxable. The ratio is calculated as of December 31 of the year prior to the distribution. This is calculated on Form 8606.

Re: IRA Basis

NormViste — Thu, 20 Feb 2025 17:17:14 GMT

I replied earlier, but I got a message saying it did not go thru, so I'll reply again.

I'm concerned about subtracting the total basis from a complete sale of an after-tax IRA.

Form 8606 only only subtracts a non-taxable portion as though I was only taking a minimum distribution, but I have sold the complete fund (actually, 3) and the remaining total basis should be subtracted from the distribution.

I can't see how to get Turbo Tax to do that.

Re: IRA Basis

DanaB27 — Sun, 23 Feb 2025 15:21:41 GMT

To clarify, do you have more than one Form 1099-R? Make sure you have the IRA/SEP/SIMPLE box checked.

As DavidD66 explained if you have a mix of pre-tax and after-tax funds then the the pro-rata rule applies. You can check Form 8606 for the calculation, if you have a * next to line 13 then TurboTax is using the IRA worksheet according to Pub 590-B to calculate the nontaxable part. If you have a value on December 31, 2024 in the IRA then part of your basis will be allocated to the funds left in the IRA. You cannot just deduct all of your basis first.

Re: IRA Basis

NormViste — Tue, 25 Feb 2025 17:03:34 GMT

I have many 1099-Rs.

New question:

Turbo Tax does not add up the taxable amounts of distributions shown in box 2a in all 1099_R forms to enter on the form 1040 line 4b IRA Distributions – taxable amount.

How can I fix that?

Re: IRA Basis

DanaB27 — Wed, 26 Feb 2025 12:39:09 GMT

Since you had a basis in the IRA, the taxable amount on line 4b of Form 1040 is calculated on Form 8606 and not the sum of the distributions shown in box 2a.