Hi,
Following up here. Ever since 2021 (Where I made 2x 6k contributions for both tax year 2021 and 2020, both within 2021), I've done Contributions & immediate conversions within each Tax year.
e.g.
For the last two years (Tax year 2022 and tax year 2023), I always trip up on the question "Any nondeductible contributions to IRA?". I *believe* I hit Yes here, but want to confirm as many articles mention not having to hit Yes if you have a planned "clean" contribution within the tax year. Subsequently, it asks for my Total IRA basis. If I look at form 8606 for last few years:
Additional question:
Thanks!
It's not helpful to start over, all the people you previously interacted with lose the connection to the discussion.
Based on a quick review of the previous thread:
I will assume you started with zero balance in any traditional IRA, and that all your contributions have been non-deductible, otherwise your situation doesn't make sense.
For 2020, you made a $6000 non-deductible contribution. That should have been reported on your 2020 tax return on form 8606, even if it was made during calendar year 2021. You should have a form 8606 for 2020 that has:
Line 1 non-deductible contributions made for 2020 ....$6000
Line 2 total basis ....$0
Line 3 did you take a distribution or conversion ...No
Line 14, total basis for 2020 and before... $6000.
Then, on your 2021 tax return, you would report the non-deductible contribution of $6000. Even though you made two separate Roth conversions, they are added together and reported for 2021. (A contribution can be retroactive up until April 15, but a conversion is never retroactive, it happens when it happens.). So your 2021 form 8606 should look something like this:
Line 1 non-deductible contributions made for 2021 ....$6000
Line 2 total basis (this is your prior basis) ....$6000
Did you make a Roth conversion...Yes
Line 6 total value of all IRAs as of December 31, 2021 ...$0 (it should be zero if you did a full Roth conversion)
Line 7 distributions ...$0
Line 8 Roth conversions ...$12,000 (assuming no gains or losses)
Line 10 ...1.00
Line 11 non-taxable portion ...$12,000
Line 14 new total basis for 2021 and earlier years ...$0
From then on, your basis in the current year (line 2) is equal to your ending basis in the previous year (line 13 from the previous year). Which should be zero.
If your 2022 form 8606 shows zero basis on line 2, but a $6000 new basis on line 14, then it sounds like you didn't properly report the conversion in 2022. What are you showing on form 8606, line 8, 10 and 11? What is shown on form 1040, line 4a and 4b?
Apologies, I had thought previous discussion was marked solved, and since I was asking a set of new questions, wasn't sure if a new thread was appropriate.
Thanks for the comments.
Firstly:
However, I'm noticing line 4 (Enter those contributions included on line 1 that were made from Jan 2021 through April 15) = 0. Since I made my 2020 Contribution in Feb 2021, I'm guessing this should instead be 6,000?
No, because if you answered "no" to the question about rollovers and distributions, you skip from question 3 to question 14 and don't fill out the rest.
2020 and 2021 look ok. It also looks like you did not report the conversion on your 2022 return. Or rather, you reported in a way that did not generate a form 8606. Form 1040 line 4a and 4b are correct for this situation, so it is a bit strange that you would not have the conversion on line 8 of form 8606. Did you use Turbotax or another software program or file by hand?
I'm not quite sure how to solve this. You probably need to file an amended 2022 return, that will include a correct form 8606 for yourself and your spouse (each of you should have a separate form 8606 for your separate IRA contributions and conversions.). It won't change your overall tax.
In some cases you may be able to file just an amended form 8606 without the whole rest of it, but I am not sure if this situation is appropriate for that. (I'm still confused as to what you did in your tax program to put $12,000 on line 4a, but have nothing on the 8606.)
@dmertz any thoughts?
For 2023, you would start out with line 2 of form 8606 as $zero, assuming that you did the proper backdoor conversion in 2022 and you fix the 2022 form 8606s.
@Opus 17 -- For 2022, When you say "reported in a way that did not generate a form 8606," are you able to clarify? Are you specifically talking about line 8 (Amount converted from traditional to roth) being blank? I guess now i'm wondering why this is blank for 2021 as well...
Yes, I used turbotax desktop, and still have the file saved. I can try to reinstall 2022 version and open it to look back at the prompts (to see how i answered). Since 1040 4a says 12,000 and b (taxable amount) says Rollover, is it possible I chose an option for rollover instead of conversion?
I agree that the 2022 Form 8606 indicates that no Roth conversion was reported on the 2022 tax return.
@moses0020 wrote:
@Opus 17 -- For 2022, When you say "reported in a way that did not generate a form 8606," are you able to clarify? Are you specifically talking about line 8 (Amount converted from traditional to roth) being blank? I guess now i'm wondering why this is blank for 2021 as well...
Yes, I used turbotax desktop, and still have the file saved. I can try to reinstall 2022 version and open it to look back at the prompts (to see how i answered). Since 1040 4a says 12,000 and b (taxable amount) says Rollover, is it possible I chose an option for rollover instead of conversion?
Yes, your 2021 form 8606 is also incorrect, although in a different way. If you look at the form and the instructions, it is a relatively simply math problem. line 1 + line 2 = line 3, and so on. Line 13 (non-taxable portion of all distributions) is supposed to be just line 11+line 12, and line 11 is supposed to be line 8 multiplied by the fraction on line 10. If line 8, 11 and 12 are all zero, line 13 can't be $12,000. (However, because line 13 does show $12,000, line 14 shows that your updated basis was zero, which does turn out to be correct in this case.)
No, I can't think of any way this could happen. Turbotax should not pass, and the IRS should not accept, a tax return with such blatant simple mathematics errors. I wonder if your PDF is wrong, but the return was filed correctly. As unlikely as it should be that the PDF is wrong, it is more unlikely that you could e-file a return with such obvious math errors.
Did you e-file?
At this point I want to send you to the IRS web site to get your tax return transcripts for 2021 and 2022. You may have to register an account if you have not already done it.
https://www.irs.gov/individuals/get-transcript
A tax return transcript is an electronic summary of all the entries on your return, and it should include a line by line summary of both 8606s for you and your spouse for those years. This will show what the IRS actually has recorded in your file. You should look specifically at line 8 (Roth conversion amount), line 11 (non-taxable portion of Roth conversions) and line 13 (should equal line 11+line 12).
See what the IRS actually has on file for you. After that, we will have a better idea of how to move forward.
Another option is to try and get tech support involved in your case. For this, you would do the following.
I can't promise they will follow up but I can ask.
If a 2022 Form 1099-R was entered into 2022 TurboTax for a distribution from a traditional IRA, on TurboTax's 1099-R form either the IRA/SEP/SIMPLE box was failed to be marked or the distribution was mistakenly marked as having been rolled over rather than being marked as converted to Roth.
@dmertz wrote:
If a 2022 Form 1099-R was entered into 2022 TurboTax for a distribution from a traditional IRA, on TurboTax's 1099-R form either the IRA/SEP/SIMPLE box was failed to be marked or the distribution was mistakenly marked as having been rolled over rather than being marked as converted to Roth.
2022 shows no conversion, resulting in the incorrect carry forward of a $6000 basis. Failure to report the conversion could be due to entering the 1099-R incorrectly.
But how could the 2021 form 8606 have an entry on line 13 if lines 8 and 11 are blank?
@Opus 17Yes, I e-filed. I downloaded transcripts. They are more of a plain text dump (without line numbers), so pasting exactly what I see
2020:
2021:
2022:
As suggested by the 2022 Form 8606, the 2022 transcript also indicates that no 2022 Roth conversion was reported on your tax return. Note that IRS transcripts don't record additions to traditional IRA basis, they only record the application of basis to traditional IRA distributions.
What is the code in box 7 of the 2022 Form 1099-R that reports the $6,000 distribution from the traditional IRA?
What is the code in box 7 of the 2023 Form 1099-R that reports the $6,500 distribution from the traditional IRA?
That’s helpful. It seems that the IRS has properly recorded your 2021 conversion, even though the math on your copy of form 8606 doesn’t seem to add up. So I would say you can close the book on 2020 and 2021, they seem to be correct.
You probably need to amend your 2022 return. I would follow up with @dmertz
@dmertz wrote:As suggested by the 2022 Form 8606, the 2022 transcript also indicates that no 2022 Roth conversion was reported on your tax return. Note that IRS transcripts don't record additions to traditional IRA basis, they only record the application of basis to traditional IRA distributions.
What is the code in box 7 of the 2022 Form 1099-R that reports the $6,000 distribution from the traditional IRA?
What is the code in box 7 of the 2023 Form 1099-R that reports the $6,500 distribution from the traditional IRA?
For both 2022 & 2023, 1099-R (For both my spouse and I) shows Code 2 in Box 7, with IRA/SEP/Simple having (X)
If those were entered but no Form 8606 Part II was generated, either the IRA/SEP/SIMPLE box was not correctly marked on TurboTax's 1099-R form or TurboTax was not properly told that the distribution was converted to Roth. (Or perhaps the wrong spouse was specified as the recipient in TurboTax, but that would just result in the conversion showing up on the wrong spouse's From 8606.)
@dmertz Sorry, but hoping you can clarify "no form 8606 part II was generated."
For the heck of it I reinstalled TT 2022 and opened up a copy of my 2022 file. Going back into the IRA section, I think this is where I went wrong:
What did you do with the money:
Choose which of the following applies:
Look at the form. As I said, it's actually a fairly simple addition and subtraction problem. Part 1 (Part I) is the front page that calculates your IRA basis. Right on line 8 it says "Enter the net amount you converted from traditional, traditional SEP, and traditional SIMPLE IRAs to Roth, Roth SEP, or Roth SIMPLE IRAs in 2023. Also, enter this amount on line 16". At the end of part 1, line 14 calculates your new basis and line 15 calculates the taxable amount of the conversion due to basis. Line 16 is on the second page in part 2 (part II). You list again the amount from line 8 (the conversion), then you list again the amount from line 11 (the non-taxable part of the conversion) on line 17, and then line 18 calculates any additional taxable amount (should be zero in your case).
If line 16 is blank, that means you did not report the conversion correctly on your 2022 return. Same conclusion we can draw if line 8 is blank. Means the same thing.
Got it, thank you for clarifying. I'll amend 2022.
Going back to 2021 and your previous comment. As you mention, given 8606 is wrong here too (in a different way) (e.g. Line 8 is blank and doesn't specify the conversion amount). However, Since line 14 has the updated basis (0), AND given the transcript looks OK, confirming I don't have to bother amending 2021?
The 2021 transcript looks correct, even though your copy of form 8606 seems to not add up. Since the transcript is ok, there is no reason to amend 2021.
I went ahead and started amending my 2022 return, I went through the sections related to IRA, with the following answers:
I also went through section within deductions & credits:
Despite all of this, when I go back to view the updated 8606 form:
I can't figure out why TT won't populate line 8 with the conversion amount. Below this it says " If line 15 has an asterisk*, quickzoom to view the calculation of the taxable and nontaxable portions of your distribution.". In doing so, I see A "Taxable IRA Distribution Worksheet" popup. Is this intentional? I also found mention of this in another thread "If there is a * (asterisk) next to line 15 then the calculations were done on the "Taxable IRA Distribution Worksheet" instead of the 8606 lines 6-13. This worksheet is described in IRS Publication 590-B worksheet 1-1.
https://www.irs.gov/publications/p590b#en_US_2020_publink[phone number removed]"
That's Turbotax's internal IRA worksheet, not the actual form 8606.
@Opus 17Yea, and apparently TT doesn't automatically send it with the e-File. I'm trying to figure out why TT won't fill out the aforementioned fields (e.g. 8-12) in form 8606, and why it instead inserts an asterisk in lines 13 & 15 (referring to the worksheet).
I'm unsure if I can file the amended form as is (as long as basis is now correct), or if I explicitly need fields 8-12 filled.
The asterisks indicate that TurboTax is using Worksheet 1-1 from IRS Pub 590-B instead of lines 6 through 12 of Form 8606 to calculate that nontaxable and taxable amounts because distributions from and nondeductible contributions to your traditional IRAs were made in the same year.
Got it, so sounds like this is expected. Thanks all for the help. I believe the amended return is in a good place now, with a correct basis.
Looking back at the prompts, I think I always get tripped on the questionnaire for "Did you make and track non-deductible IRA contributions." I always want to hit yes thinking its talking about my normal in year contribution, without realizing its specifically talking about contributions for prior years.