Received 1099R for closed IRA in 2020, but original investment was never deducted.

[steve93940]

I opened a 12 month IRA CD in early 2019. The intention was to reduce my tax bill for 2018. However this was a mistake as I was already maxing a 401k, so I got no benefit from the IRA. Once it expired in early 2020 I cashed it in (I'm over 60). Now I have a 1099R that shows I have a distribution for the full amount and therefore I am being taxed as if I had received the benefit a year earlier. How can I file this so that I only pay tax on the small amount of interest I earned, rather than the full amount?

[DavidD66]

When you opened the IRA and made a non-deductible contribution, you should have completed and filed Form 8606, Nondeductible IRAs.  Then when you make a withdrawal from that IRA in TurboTax,  it should trigger Form 8606. 

For more information, see the following TurboTax Help Article:

Where do I find Form 8606?

[steve93940]

Thanks for the reply.

I followed the instructions about 8606, but cannot get TT to generate the form in my return.
I opened the IRA CD for $6000 in Feb 2019 and attempted to apply it to 2018. I remember TT telling me it could not be applied to reduce my 2018 tax. It appears in the worksheet for 2019 but I think it should have generated a 5329(?).

Could it be that I have to resubmit 2018 or 2019?

[DanaB27]

If it was nondeductible on your 2018 tax return then you should have Form 8606 on your 2018 tax return.

Please follow these steps to enter your 1099-R and trigger the 8606:

1. Click on the Search on the top and type “1099-R”
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Click "continue" and go through the questions until the "Any nondeductible Contributions to your IRA?" screen and answer "Yes"
5. Enter your basis (amount of nondeductible contributions up to 31. Dec. 2019)

[steve93940]

Just to update, I went through again with your suggestions and also reentered the 1009R. This time the 8606 was generated and reduced the tax to just the small amount of interest I earned.

Thanks