Question regarding a Form 1099R

[ri-solano]

Hello - in October 2022 I opened an IRA traditional with $2000 by mistake (I meant to open an IRA Roth). Later in December I asked the financial institution where I opened it to transfer or convert the $2000 into an IRA Roth. The financial institution opened an IRA Roth and transferred the funds from the IRA Traditional and closed it. I received a Form 1099R which shows the $2000 in Box 1 and Box 2a. It also shows an "X" in Box 2b "Taxable amount not determined". And it shows Code 7 "Normal distribution" in Box 7. It looks to me that I will be responsible for paying taxes on the $2000 even though I never withdrew the funds, it was just a transfer from the IRA Traditional to the IRA Roth. I contacted the financial institution and they said the Form 1099R I received is correct, that they need to report the $2000 as a normal distribution. They also mentioned that I might need to file Form 8606. Do I need to file Form 8606? Should I expect the financial institution to send me a corrected Form 1099R? How should I enter the information on Form 1099R in Turbo-Tax? Any feedback or guidance will be greatly appreciated it. Thanks!!

[DanaB27]

Yes, you will have to file Form 8606 for the conversion. Yes, generally conversions are taxable unless you had a basis (nondeductible contributions) in your traditional IRA.

No, you don't need a corrected Form 1099-R, your Form is correct.

You will enter the traditional IRA contribution in TurboTax and can make it nondeductible (this will create a basis):

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the form 1099-R for the conversion:

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

Please be aware you had pre-tax funds in any of your traditional/SEP/SIMPLE IRAs then the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part. You can see the remaining basis on line 14 of Form 8606, this basis can be carried forward. Therefore, each distribution/conversion in the future will have a taxable and nontaxable part until the basis is all used.

[ri-solano]

Thank you DanaB27 for the steps below. Will work on this. I believe that Turbotax will create Form 8606 in my return, is that right? 

[MarilynG1]

We'll automatically generate and fill out Form 8606 (Nondeductible IRAs) if you reported any of these on your tax return:

• Nondeductible contributions made to a traditional IRA
• Distributions from a traditional, SEP, or SIMPLE IRA that had nondeductible contributions (excluding rollovers, conversions, recharacterizations, qualified charitable distributions, one-time distribution to fund an HSA, or return of certain contributions)
• Conversions from a traditional, SEP, or SIMPLE IRA to a Roth IRA
• Distributions from a Roth IRA (other than rollovers, recharacterizations, or a return of certain contributions)

Here's more info on How to Trigger Form 8606. 

@ri-solano 

[ri-solano]

Hi MarilynG1,

Thank you for your email. I followed the steps you outline, but when I got to the screen "Any Nondeductible Contributions to Your IRA", you directed me to click on "Yes" but according to the legend this refers to any traditional IRA from 2021 or prior years (see below). I didn't have any IRA traditional nor Roth in 2021 or prior years. I opened them in 2022. Should I still answer "Yes" to the question to have Form 8606 created? Thanks!

Any NonDeductible Contributions to Your IRA?

Let us know if you made and kept track of any nondeductible contribution to your traditional IRA from 2021 or prior years. (This is not common.)

Most people do not make or track any nondeductible contributions to ther IRAs.

Yes, I made and tracked nondeductible contributions to my IRA.

No, I did not make and track nondeductible contributions to my IRA.

[JulieS]

No, if you opened your first traditional IRA in 2022, you have to answer No to "Any Non-Deductible Contributions to Your IRA? Let us know if you made and kept track of any nondeductible contribution to your traditional IRA from 2021 or prior years."

[ri-solano]

Hi JulieS - Thank you for your reply. OK, I selected No to "Any Non-Deductible Contributions to Your IRA". Now, I have completed my tax return but where do I see the Form 8606 to verify the information? In prior answers to this message, I was told that Turbotax will create Form 8606 in my return but I don't see it anywhere in my filing. 

[DavidD66]

You don't need a Form 8606.  Because you made and withdrew the Traditional IRA contribution in 2021, it's as if you never made the contribution.  

[ri-solano]

Hello DavidD66 - thanks for your reply, however, NOW I am getting very confused. If you look at the thread of messages, I was told that I needed Form 8606 but now you're saying that I don't need it.  Also, I didn't have any Traditional IRA in 2021 as you stated in your message. The one I had was for 2022 and transferred the funds from this Traditional IRA to a Roth IRA. I entered these facts in my return in Turbotax following advice in this thread of messages and that's why I was told that Turbotax will create Form 8606 in the background. Could someone please clarify?? Thanks!

[LindaS5247]

From reading your responses you are correct, you do not have anything to report with respect to 2021.

It was correct to select "No to "Any Non-Deductible Contributions to your IRA" with respect to 2021.

A Form 8606 is required for the conversion (IRA to Roth IRA, which is a taxable event) and should be automatically generated by TurboTax when you answered these questions discussed above.

You should be able to view your Form 8606 by Previewing/Printing your Form 1040.

You can preview your return in the TurboTax Online by following these steps:

1. Sign in to your TurboTax account
2. Open or continue your return
3. Select Tax Tools from the menu (if you don't see this, select the menu icon in the upper-left corner)
4. With the Tax Tools menu open, you can then:
   1. Preview your entire return: Select Print Center and then Print, save or preview this year's return (you may be asked to register or pay first)
   2. View only your 1040 form: Select Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu

You can preview your return in the TurboTax CD/Download software by following these steps:

1. With your return open in TurboTax, select Preview from the File menu at the top. (If you don't see "Preview," open your return, not just the program).
2. In the pop-up window, choose the set of forms you wish to see (all official forms, specific forms, etc.) and select Preview.
3. Scroll down to view all the forms if you chose to preview multiple forms.

If you are using TurboTax Desktop Version you should be able to see your Form 8606 by doing the following:
1. Sign into your account and select your current return

2. Select Tax Tools and then Tools (see attached tax tools)

3. Select Topic Search (see attached image)

4. Search for 8606 and select go

If this does not resolve your issue please feel free to contact us here on TurboTax Community or click here for information on Turbo Tax Support.  You can talk to a Live Agent and share your screen.  

Click here for detailed information on Form 8606, Nondeductible IRA's.

[ri-solano]

Hello LindaS5247 -thank so very much for your message. I greatly appreciate that you looked at all the responses in this chain of messages. I was able to navigate the forms based on the steps you outlined. Very pleased with your help!! Excellent service!! Regards.