1099-R and contributions for previous year

[bh-dolla]

Short:  I made two after-tax contributions to a traditional IRA.  One for $5500 for the previous year (2018) and one for $6000 for the present year.  Both of these were subsequently converted to a Roth IRA.  After entering my 1099-R forms turbotax thinks that $5500 of my contribution was taxable.

Question:  Why does turbotax think any of my IRA contributions are taxable?  What should I do to make it clear that the $5500 previous year Traditional IRA deposit (and its conversion to Roth) are indeed for the previous year.

Details:

• 2018 (previous year) contribution
  • Deposit Date:  4/5/2019
    • Note:  Deposit noted as "previous year"
  • Conversion to Roth IRA Date:  4/15/2019
• 2019 (current year) contribution
  • Deposit Date:  8/19/2019
  • Conversion to Roth IRA Date:  8/19/2019
• 1099-R
  • Cell 1 "Gross Distribution": $11500
  • Cell 2a "Taxable Amount":  $11500
  • Cell 7 "Distribution Code":  2
• 5498 (2019)
  • Type:  IRA (assume this means traditional)
  • Contribution:  $6000
• 5498 (2019)
  • Type:  Roth IRA
  • Contribution:  $11500

Thanks!

[macuser_22 · Accepted solution]

It Sounds like you did not enter the prior years non-deductible contribution into the interview when it asked for it.    When you filed 2018 there should have been a 8606 form showing that on line 1 & 14 to enter into 2019.  That would go on a new 2019 8606 form line 2.  The 2019  nondeductible contribution entered into the 2019 IRA contribution interview should automatically be on the 8606 line 1 with the total of both on line 3.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

[bh-dolla]

Thank you for such a quick reply macuser_22.  I've got several questions and additional context.

Additional Context:  When I filed my taxes in 2018 I did not know I was going to make a non-deductable IRA contribution for that year.  Thus, it was never reported.

Questions:

Do I need to amend my 2018 return for all of this to work out?

I attempted your suggestions, but the turbotax tool did not respond as indicated by your reply.  Can you provide any additional suggestions or can I provide any additional information to help with understanding this problem?

I attempted to follow your steps, but I never got turbotax to ask if I had any tracked non-deductible contributions.  Here's what I did:  

1. Clicked on 1099-R

2. Clicked "edit" on my one 1099-R of $11,500.

3. Clicked continue (saying this is "Form 1099-R, withdrawal of money from 401(k) retirement plans, pensions, IRAs, etc.)

4. Turbotax opens up the 1099-R, and I clicked continue.

5. Turbotax says "Good news:  You don't ow extra tax on this money", and it thinks this is the case based on my entry to box 7 (distribution code 2).  I click continue.

6. "Did You Inherit the IRA from ...?"  I keep "No" selected.  Click continue.

7. "What Did You Do With The Money From ...?"  I select "I moved the money to another retirement...".  I select "I converted all this money to a Roth IRA account.".  I click continue.

8. Turbotax takes me back to the 1099-R window.

I've taken a look at the Taxable IRA distribution worksheet, and it looks like turbotax is really hanging up on the $11,500 all being from 2019 and the fact that seemingly only $6k was , and I don't see any way around that.

Thanks again for all your help.  I'm sure it's difficult to provide helpful tips given an incomplete picture.  I really appreciate it.

[macuser_22]

---

@bh-dolla wrote:

Questions:

Do I need to amend my 2018 return for all of this to work out?

I attempted to follow your steps, but I never got turbotax to ask if I had any tracked non-deductible contributions.  Here's what I did:  

No. You do not need to amend 2018, but you do need to report the 2018 non-deductible contribution on a 2018 8606 form that can be filed by itself.   Enter the non-deductible contribution on line 1.  Any prior year non-deducible contributions on line 2.  The total of  1&2 on line 3 and 14 and mail to to the same address that a 1040 would be mailed.

2018 form https://www.irs.gov/pub/irs-prior/f8606--2018.pdf

2918 instructions https://www.irs.gov/pub/irs-prior/i8606--2018.pdf

where to mail https://www.irs.gov/filing/where-to-file-addresses-for-taxpayers-and-tax-professionals-filing-form-1...

That part of the interview comes after the 1099-R summary screen (where it asks if you have another 1099-R to enter) - select continue and keep going.

[bh-dolla]

macuser_22,

Thanks so much again.  I've confirmed that putting $5500 for Dec. 31 2018 total basis does reduce my tax liability as I'd expect.  I think I'm seeing how this will all work.  Thanks for your patience.

I've now got a question on form 8606.

Issue:  As I've currently drafted my  2018 form 8606, my total basis (line 14) is $5500 (I expect this), but my taxable amount (line 18) is also $5500.  There are two consequences as I understand things:

1. It's still saying I'll owe taxes on $5500.
2. It's also imply that I'll need to amend my 2018 1040 (in accordance with line 17's instructions).

Here's my draft for 2018 8606:

I think the issue might be my entry on line 8.  It's unclear if 2018 is referring to the calendar or the tax year.  I entered $5500 assuming it meant the tax year.  What concerns me about entering $0 for line 8 is that if it weren't for the $0.02, I'd be dividing 0 by 0 at line 10, and I don't know what the IRS wants to put there for indeterminate values.  It leads me to believe the IRS is expecting some kind of non-zero number there.

For the sake of completeness here's my last 8606 (comes from 2016) followed by the 8606 that TurboTax has created from 2019 (with $5500 basis).

8606 from 2016

8606 for 2019 (so far) with $5500 basis

 

I think we're getting close 🙂

Thanks again!

[macuser_22]

If you did not make any distributions or conversions in 2018 and only had a nondeductible contribution then that contribution  would be on a 2018 8606 lines 1, 3, 4 & 14.   I don't understand line 8 since you did not indicate that there was also a 2018 conversion.

Note: to see the 2019 calculations, the * (asterisk) next to line 15 says that the "Taxable IRA Distribution Worksheet" is used in place of the 8606 for the calculations, but that seems to be correct.

[anony1289]

Hi bh_dolla,

Thanks much for the detailed description. My situation might be similar to yours. Please let me know what values need to be supplied in 2018 form 8606?

[nestlen]

Hello,

I think my situation is gonna be similar to yours in the future,  I am considering put after-tax money to traditional IRA and then do a backdoor Roth rollover for the year of 2020 before May 2021.  In this case I won't receive 1099R for 2020 but have to wait for next year.  Please kindly let me know if you have to file 2018 amend as I might have to file 2020 amend later if I choose to proceed. Thanks!

[MarilynG1]

You won't have to Amend your 2020 return if you report your Non-Deductible IRA Contribution on your 2020 return.

The Roth conversion will be reported on your 2021 return.

Click this link for more info on Backdoor Roth Contributions. 

[pp1422]

I am in the same situation this year, can I still e-file? given that I'd need to file Form 8606 for year 2020. I am currently filing for fiscal year 2021 taxes.

[DanaB27]

Yes,  you should be still able to e-file your 2021 tax return.

To enter the nondeductible contribution to the traditional IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2020 Form 8606 line 14 (if you had a basis in the prior year)
10. 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 1099-R conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "continue"
6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@pp1422