1099-R distribution mysteriously treated as nontaxable income

[jfbeckmann]

Do you see the letters QCD next to line 4b?  If so, this stands for Qualified Charitable Distribution and for some reason Turbo Tax "thinks" you donated your entire IRA distribution to qualified charities.  If you don't see QCD on your tax return, then ignore this suggestion.

[Seigga84]

dmertz  Thank you for the terrific reply.  You're right, it's not HSA- or QCD-related. I've got more digging to do on your point 3.

• Line 6 (YE2023 values) of form 8606 has the correct amount.  My traditional IRAs do not have zero balance as of YE2023.
• Line 7 of form 8606 has the correct amount of distributions.  It's much lower than my basis. 
• Line 15c of form 8606 (taxable amount) is zero. 
• But upon closer examination, line 2 of form 8606 (total basis in traditional IRAs) looks high, and I'll have to dig deeper to ensure the right number there for this year and future years.

[dmertz]

If you used TurboTax to prepare your 2022 tax return and transferred that tax file into 2023 TurboTax to begin your 2023 tax return, the amount on line 2 of the 2023 Form 8606 would normally have come from line 14 of your 2022 Form 8606, so you should examine your 2022 tax return to see if any errors were made there.

[Seigga84]

dmertz  I think I found the problem - I was double-counting the rollover basis from my employer's retirement plan.  When TurboTax asked me to enter my IRA basis on 12/31/2022, I included my retirement lump sum plus the sum of my non-deductible contributions over the years.  Then I typed in the lump sum again when TurboTax asked me about the net rollover basis thinking TurboTax would subtract the two.  That's why form 8606 box 2 looked suspiciously large. 

Suggestion:  when TurboTax asks for the IRA basis, include additional wording to remind the user to exclude a rollover basis from employer retirement plans.

The lump sum is no longer double-counted, the taxable amount (form 8606 box 15c) is no longer zero, and my refund is now tame.  Fortunately, this was caught by you and the community in the first year I withdrew cash from my Traditional IRA.  Folks at the IRS are probably going to chuckle over my explanation that I had to type because of my PEBKAC error.  Thank you, dmertz, and the community VERY MUCH for your help!

PEBKAC = Problem Exists Between Keyboard and Chair