I am retired and rely on Turbo Tax to determine how much Traditional IRA I should convert to Roth IRA each year before hitting the income limit of Medicare Part B&D premiums increases. I bought 2021 Premier CD for Windows at Costco three days ago and installed all latest updates. When I enter the date for IRA distribution, I found the following problems:
After entering ALL 1099-R entries in 2020 Premier and hit Continue, one of the next screens is "Any Nondeductible Contribution to XXX's IRA?", where I can select "Yes, I made and tracked nondeductible contributions". The following screen allows me to enter the total basis value as of 12/31/2019. Then, there is a screen to allow me to enter the Total IRAs value as of 12/31/2019. Turbo Tax will calculate the taxable amount of the total IRA distribution and put the value of Total IRA Distribution in Form 1040 line 4a and Taxable Amount into Form 1040 line 4b, which is correct way to handle the Traditions IRAs converts to Roth IRAs.
However, the 2021 Premier made some changes and resulted in the problems:
After enter EACH 1099-R, I was ask to choose if the IRA distribution is "From a Qualified Plan" or "From a Non-Qualified Plan". As far as I know, Traditional IRA or Roth IRA is NOT Qualified Plan as 401K, 403b, etc. are. So, after I select "From a Non-Qualified Plan", Turbo will go back the screen of 1099-R Entries. After filling out all 1099-Rs, I hit "Continue" and the screen of "Any Nondeductible Contribution to XXX's IRA?" as well following screens to enter the nondeductible IRA basis and total IRA balance at 12/31/2020 never show up. The screen goes back to the "2021 Income Summary" page instead. However, if I choose the IRA distribution is "From a Qualified Plan" after filling each 1099-R, I was able to enter nondeductible IRA basis and total IRAs balance information. The problems of filling IRA distribution this way are (1) In the Form 1040, line 4a and 4b are empty. (2) the total IRA distribution is shown in line 5b as "ROLLOVER" and totally taxable, which is incorrect, and taxable amount of IRA distribution never shows up in the Form 1040.
I know there are a lot of discussions about Roth IRA conversion, but I don't think the Roth IRA conversion rules have changed for 2021 tax year. Therefore, the issue is not about the rule changes, but TurboTax itself. I understand that 2021 Premier is not finalized, but would like to point out the problem so that someone in the Intuit can investigate the issue and fixed it QUICKLY. Thank you very much!
