topic Why do my taxes increase in TT2019 when I enter the 12/31/19 remaining value of my traditional IRAs after reporting RMD income from 1099-R? in Retirement tax questions

Why do my taxes increase in TT2019 when I enter the 12/31/19 remaining value of my traditional IRAs after reporting RMD income from 1099-R?

rangermom — Sun, 22 Mar 2020 20:40:29 GMT

Re: Why do my taxes increase in TT2019 when I enter the 12/31/19 remaining value of my traditiona...

BillM223 — Mon, 23 Mar 2020 13:51:53 GMT

The reason that TurboTax asks you for the value of your IRAs on December 31, 2019 is so that it can calculate a penalty for excess contributions to your traditional IRAs. The penalty is 6% of the smaller of your excess contributions or the value of your IRAs at the end of the year.

Once you entered the value on 12/31/2019, then TurboTax was able to calculate the penalty on form 5329 on line 17.

So you want to search for messages referring to excess contributions (perhaps you already saw them).

I don't believe that this had anything to do with your RMD.

Re: Why do my taxes increase in TT2019 when I enter the 12/31/19 remaining value of my traditional IRAs after reporting RMD income from 1099-R?

dmertz — Mon, 23 Mar 2020 14:24:45 GMT

(This almost certainly has nothing to do with an excess contribution.)

Because you have basis in nondeductible traditional IRA contributions, the year-end value of your traditional IRAs is needed for TurboTax to be able to properly calculate on Form 8606 Part I the taxable amount of your IRA distribution. Until you make that entry, TurboTax will assume that all of your basis in nondeductible traditional IRA contributions can be applied to the distribution, when, by law, only a proportional amount of that basis is permitted to be applied. Once you enter the year-end balance, TurboTax recalculates to determine the correct, higher taxable amount of your IRA distribution.

Re: Why do my taxes increase in TT2019 when I enter the 12/31/19 remaining value of my traditional IRAs after reporting RMD income from 1099-R?

rangermom — Mon, 23 Mar 2020 14:43:55 GMT

I understand now. Thank you so much.