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Benoit2
New Member

IRA Deduction

In the 2020 IRA Deduction Worksheet, when only the spouse is covered by a retirement plan at work, i.e., line 1b has an x, the MAGI shown in line 12 is obtained by adding back to the AGI the spouse IRA contribution and only half of the other taxpayer IRA contribution, thus under-valuing the MAGI. It seems to me that it is an error. Can anyone confirm or not?

3 Replies
macuser_22
Level 15

IRA Deduction

That is not how MAGI  for IRA's is calculated.

 

Per the IRS Pub 590A worksheet 1-1.

https://www.irs.gov/publications/p590a#en_US_2020_publink100025076

 

Worksheet 1-1.Figuring Your Modified AGI

Use this worksheet to figure your modified AGI for traditional IRA purposes.
1. Enter your adjusted gross income (AGI) from Form 1040, 1040-SR, or Form 1040-NR, line 11, figured without taking into account the amount from Schedule 1 (Form 1040), line 19 1. _____
2. Enter any student loan interest deduction from Schedule 1 (Form 1040), line 20 2. _____
3. Enter any tuition and fees deduction from Schedule 1 (Form 1040), line 21 3. _____
4. Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45 4. _____
5. Enter any foreign housing deduction from Form 2555, line 50 5. _____
6. Enter any excludable savings bond interest from Form 8815, line 14 6. _____
7. Enter any excluded employer-provided adoption benefits from Form 8839, line 28 7. _____
8. Add lines 1 through 7. This is your Modified AGI for traditional IRA purposes 8. _____
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Benoit2
New Member

IRA Deduction

Sorry, I was incomplete in asking my question. Let me try again. Given that Turbotax is following IRS guidelines and given that lines 2-7 are all zeros in the worksheet 1-1 of the IRS publication 590-A, we are left to calculate the MAGI for line 12 of the IRA Deduction Worksheet by using the AGI of the 1040, line 11, “figured without taking into account the amount from Schedule 1 (Form 1040), line 19”, which happens to be the IRA deduction adjustment to income. Thus my previous question … or asked a different way: can anyone check line 12 of the IRA Deduction Worksheet to see if they get the right MAGI, given that both in the couple contribute to their IRA with one being covered by a retirement plan at work (line 1 of worksheet) and given the above assumptions for the worksheet 1-1 of the IRS pub 590-A?

 

Is it also odd to anyone that you need the IRA deduction (Schedule 1, line 19) to calculate the MAGI necessary to obtain the IRA deduction (IRA Deduction Worksheet, line 16)?

 

BTW, the IRS (590-A) worksheet 1-1 does not list everything needed to calculate MAGI: you also have to add back to the AGI , if needed, the unemployment exclusion. See

https://www.irs.gov/newsroom/2020-unemployment-compensation-exclusion-faqs-topic-e-impact-to-income-...
Anything else missing? It would be nice if TurboTax provided a worksheet to see how one arrives at the line 12 of the IRA Deduction Worksheet.

Benoit2
New Member

IRA Deduction

I am resolved my apparent issue. I was trying different scenarios of Roth conversion amounts together with various regular IRA deductions to offset the extra tax due to the conversion. When the IRA deductions are fully deductible, everything is fine and the MAGI (line 12 in IRA Deduction Worksheet) comes out as it should be. When the deductions are only partly deductible, it is a little bit trickier but everything is consistent.

As for the oddity I was referring to in my previous post, it is not real: the IRA deduction that you subtract from Total Income to get to the AGI is then added back to the AGI to get MAGI, so the amounts are canceling out, meaning they are not really there in the calculations.

Thanks for those interested in the discussion; it was a good sounding board for me to write about it.

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