1099-R summary needs fixing-- line 40 "Sales Tax"

[Beanie]

Autocalculated amount 1099-R Summary line 40 "Nontaxable Distrubtions for Sales Tax Deductions"....  then autofilled amount as discount/credit to 1040 Line 4a-- resulting in incorrect amount 1040 Line 4b.

Why would an RMD have a Sales Tax Deduction??    I'd manually fix if I could but unable to change Sales Tax amount to Zero.

[RogerD1 · Accepted solution]

It sounds like your retirement plan had some contributions that were made on an after tax basis.  The amount of the contributions that were made on an after tax basis are withdrawn in proportion to the pretax contributions made to the retirement account.  For pensions, the 1099-R will have an amount of employee contributions in box 5 if any were made.  Retirement accounts such as IRAs may have had contributions that were not deductible for taxes in the year they were made, in which case you report the total non-deductible contributions in TurboTax so the program can calculate the part of the 1099-R distribution that is non-taxable.

If Form 1040 has a higher amount on line 4a (total distribution amount of IRA) than on 4b (taxable amount of IRA distribution), then there must have been some non-deductible contributions to the IRA at some point that were reported in TurboTax.  TurboTax will carryover the remaining amount of non-taxable basis year over year to determine what amount of the IRA is non-taxable.

As for line 40 on the 1099R Summary worksheet for Nontaxable Distributions for Sales Tax Deduction:  This amount is used as a reduction to income used for the sales tax deduction calculation that can be used for itemized deductions.  This line has no effect on the 1040 form line 4a or 4b, but should be equal to the difference between those two amounts.

[Beanie]

We did not have any after-tax contributions. There is nothing on the 1099-R which would suggest that. The RMD distributions all came from IRA/SEP/Simple plans-- with the box checked and code 7 entered. 

What is really odd is that the lesser $ IRA RMD distribution has the biggest 'sales tax' discount on 1099-R Summary line 40.  The two columns of line 40 add up to the discrepancy on 1040 line 4a (correct) and 4b (incorrectly reflecting the 'Sales Tax' from 1099-R Summary form.

We can't figure out where TT is pulling this info from! We have removed forms and re-entered info 2 times now-- without (first pass) and with (second pass) downloading from financial institution.  Next up is starting starting a new return without importing info from previous TT files. Or using on-line IRS form.

This is a big PITA to say the least.   My faith in TT is waning rapidly-- after years and years of use.

[Beanie]

Finally I grasped the issue! YES years ago we did have pre-tax contributions to our IRA accounts (filed on form 8606).   Our pre and post tax contributions were co-mingled in our IRA accounts in the years before Roth accounts.

THANK YOU to all who repeated and repeated the 1040 4a vs 4b explanation. And clarified that the 1099-R Summary Sales Tax line 40 was for Sales Tax deduction only, not form 1040. 

My faith in TT is restored. : )