Turbotax Premier 2022 indicates that I owe Federal taxes ($2,950). It indicates that if I make a contribution to a traditional IRA, up to my limit ($7,000 for being 63 years, married, single income), then I can reduce my taxes. It also says that I can do so up until 4/18/2023. So, I contributed to a traditional IRA the $7,000, entered in Turbotax, and reduces the taxes due to $1,356. Nice. But when I answer the question about:
"Tell us how much of the above total contribution for 2022 you contributed between January 1,2023 and April 18,2023", and I enter the $7,000, then it reverts back to a Tax due of $2,505. A reduction of only $445. Are these calculations correct? If so, why would anyone put $7,000 of hard cash into an IRA (that will immediately lose money due to market conditions) if it is only going to obtain a $445 reduction on the taxes due for 2022? And then it refers that I should have a Year-End summary from my IRA institution or a Form 5498, which most likely will not reflect this contribution. Am I missing something here?
No, if by contributing to a traditional IRA you saved approximately $1,400, then that savings amount should not change based on your response to the question. On the screen in question entitled Tell Us How Much You Contributed, did you include the $7,000 amount in the box, Your total 2022 traditional IRA contribution? Review that question and make sure the $7,000 amount has been entered.
Additionally, on the screen, Choose Not to Deduct IRA Contributions, review your response to ensure that you checked the button, No, I'll keep my deduction.
Lastly, are you covered by a retirement plan at work? If yes, you may still contribute to a traditional IRA; however, the amount you can deduct may be subject to various limits.
Thanks for your reply.
Well, it does change the savings amount (based on the Tax Due amount), when I enter the amount on the question. Please attached screenshots. Number 1 is before entering any contributions, number 2 with the contributions, and number 3 with the question answered. All other questions and answers have been entered as per your suggestion. I do have the latest software updates.
Should I leave the answer to the question blank?
Thanks
The box asking if you made the contribution in 2023 is used only if you have a distribution from a traditional IRA in 2022. Check the IRA Deduction Worksheet for income, distributions and any issues. You are allowed to withdraw the funds by the return due date since you contributed this year.