Do After Tax Contributions Carry To Inherited IRA?

[Romper]

My wife passed away in July 2023. Our daughter is the beneficiary of her Traditional IRA.

Over the years we contributed after tax money to her Traditional IRA and TurboTax has recognized the after tax money as the basis for the IRA and adjusted the tax due.

Do after tax contributions carry forward to the inherited IRA?

Where does our daughter enter the the after tax basis in TurboTax?

TurboTax Premier CD version on Windows 10 desktop.

Thanks in advance.

[Critter-3 · Accepted solution]

The income tax treatment of the IRA remains the same from the original account to the inherited IRA. So, accounts made with pre-tax dollars (as in a traditional IRA) or after-tax dollars (as in a Roth IRA) are still treated the same way in an inherited IRA.  Hopefully you can get the form 8606 from the decedent's last filed return showing the basis amount needed by the beneficiaries. 

[Romper]

Thanks Critter...

That's the answer I needed.

Will our daughter have the ability to enter the after tax contribution in a new blank form 8606?

[Critter-3]

The form 8606 is only used in the years that there is a distribution ... when entering the form 1099-R follow the interview screens to enter the prior form 8606 carryover amount. 

[Romper · Accepted solution]

Thanks, I found it under the 1099-R 

Lets find your IRA basis.

[fanfare]

TurboTax  ( and other personal tax software) does not handle your situation - inheriting an IRA with basis.

There are workarounds.

@Romper 

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You must use Form 8606 calculation to determine the taxable portion using the basis in the inherited IRA.
-
you can calculate the taxed portion on Form 8606 yourself to discover the proper amount for 1099-R box 2a.
you can start a separate tax return in desktop TurboTax and use that one to calculate the Inherited IRA taxed portion.
Then you have to fudge up a 1099-R that produces those amounts on your actual Form 1040.
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Do you have the correct taxable amount on Line 4b? and the distribution amount on Line 4a?
E-file your return, don't file on paper.

After it is ACCEPTED ,
get Form 1040-X from IRS website and mail it in with your 8606, which you can also get in fillable PDF.
Note: since you are not changing any dollar amounts on your amended tax return, you can leave all the lines 1-23 EMPTY.
The names on 8606 should be "<owner> and <your name> BENE" or Beneficiary if it fits, and your SSN.

Part III explanation: "didn't include beneficiary Form 8606 with e-File".
You will have to mail it so this does not use up your one 1040-X e-File.

In a few months to a year, you will get an acknowledgement from the IRS.
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The other option is to file a paper return and attach the correct Form 8606 for an inherited IRA. No 1040-X is involved.

[Romper]

Thankyou Fanfare

[fanfare]

TurboTax won't put the correct names on the beneficiary Form 8606.

the basis shown will be reported as your basis not the inherited IRA basis.

If you're willing to ignore that, and you don't have a distribution from your own IRA with basis in the same year,

you can use the TurboTax result.

TurboTax won't generate two Forms 8606 for one person.

@Romper