FORM 8606 Bug

[Karl53]

Simple Question filing FORM 8606 on my 2024 Return. (Turbo Tax Help Desk can not resolve after 2 days and 4 hours troubleshooting this issue).

ISSUE: Turbo Tax did not roll my Non-Deductible Basis over. (Have not contributed to Traditional IRA since 2013).

STEPS TAKEN: Entered my correct basis in the IRA section where it asks for previous years basis. (Also tried on worksheet and directly on FORM 8606 which just loops you back to worksheet).

RESULTS: Turbo Tax then RUNS a CALCULATION and substantially increases my refund????

QUESTION: How do I get my basis back onto Form 8606 WITHOUT any calculation?

(Note: Firmware is up to date and was reinstalled, also tried updating basis under amended return).

WHAT IF: Logically, what if a NEW USER of Turbo tax tried to enter their 8606 Basis? They could not do it without the program increasing their refund. 

BUG?:  This may be a BUG in the software.  Turbo Tax should escalate this to a programmer who can test this themselves.

WORKAROUND:  I see of no workaround for this issue, neither could a turbo tax rep.

USER ERROR: Not ruling out user error either, but talking with Turbo Tax rep who confirmed this should not happen my sense is that it is sense is a bug in the program.

TO TURBO TAX: If there is a workaround please share it with everyone.  If it is a bug please notify when it has been corrected.

Appreciate any help to resolve this.  

[baldietax]

bit more context is probably needed to help

so to confirm, you haven't contributed since 2013 but you had a basis from pre 2013?  Have you been filing 8606 annually, was there an 8606 in your 2023 file for TT to rollover? 

When you say "the worksheet" - are you using the interview steps under Deductions & Credits section in EasyStep for "Traditional and Roth IRA Contributions" which will ask for prior year basis.

can you clarify what else was happening to your IRA and on Form 8606 - did you have a distribution or IRA conversion?  If changing the basis impacted your taxes then I would think it's recalculating a distribution based on the updated basis (which would reduce taxable amount on that distribution and increase your refund).  If not are you just trying to file 8606 with your basis that didn't change in 2024?

what version of TT are you using - desktop (win or Mac?), or online?

[Karl53]

Thanks for responding.

              YOUR QUESTION                                                                  MY RESPONSE

Have not contributed to Traditional IRA since 2013:              Correct

Have you been filing 8606 Annually:                                   Assumption that Turbo Tax had continued to file.                                                                                                                They had in past versions but it appears to have                                                                                                                 been dropped from filing.

                                                                                                Also note that my wife’s basis had continued to track,                                                                                                      but when I did a manual re-install software requested                                                                                                       my wife’s basis dropped off and went to zero.  Same                                                                                                        issue trying to re-enter her basis again.

Was there an 8606 in 2023:                                                 Looking back I did not see one.

The Worksheet/are you using the interview

steps under Deductions & Credits section

in EasyStep for "Traditional and Roth IRA

Contributions" which will ask for prior year basis.:            Yes, using step by step.

Traditional and Roth IRA ask for prior year basis:               Yes, answered and filled in box with Basis. This is                                                                                                                when the calculation runs and increases my refund                                                                                           

Did I have a distribution or conversion:                               No, distribution or conversion.  A conversion                                                                                                                      occurred back in 1998, Turbo tax was tracking basis                                                                                                        correctly well after that.

If changing the basis impacted your taxes then

think it's recalculating a distribution based on the

updated basis

(which would reduce taxable amount on that

Distribution and increase your refund):                        Agree with your assumption that the program is                                                                                                              recalculating a distribution.

If not are you just trying to file 8606 with your

basis that didn't change in 2024?:                               Yes that is correct, my basis has not changed since 2013,                                                                                                 Just trying input my basis for Turbo Tax to track.

What version of TT are you using

- desktop (win or Mac?), or online?:                            Version 024.000.0339. Using Win 11.  Note, have                                                                                                            updated to latest version of Turbo Tax, also Help desk                                                                                                     re-install the latest version manually.

Please let me know if you have any additional questions.

Thanks for you quick response to this request.

[DanaB27]

Are you sure you do not have a distribution or conversion entered? Do you have any Form 1099-R entered? If your refund increased after entering the prior basis then this would indicate that you used this basis on a IRA distribution/conversion calculated on Form 8606.

Note, if you did not make a nondeductible IRA contribution or took a distribution/ made a conversion in 2024 then you do not need to file Form 8606. Please keep your last filed Form 8606. Please see Who Must File 2024 Form 8606.

It would be helpful to have a TurboTax ".tax2024" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number and add @DanaB27 . This will allow us to open a copy of your return without seeing any personal information.  

The instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number and add @DanaB27 . This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

[dmertz]

If your refund increases when you enter your basis in nondeductible traditional IRA contributions, this implies that you have an otherwise fully taxable distribution or Roth conversion being reported on your 2024 tax return.  When you add the basis, TurboTax then performs the required calculation on Form 8606 Part I to determine the nontaxable portion of that distribution or Roth conversion.  However, you must also make sure that you have entered your 2024 year-end balance in traditional IRAs for the calculation on Form 8606 to be performed correctly, otherwise the result will be an incorrectly high nontaxable amount due to TurboTax incorrectly assuming that your 2024 year-end balance in traditional IRAs was zero.

Regarding the intervening years, no Form 8606 was to be included for a particular year if there were no contributions or distributions that required Form 8606 to be included.  In that case, your last filed Form 8606 is still current with respect to your basis that carries forward.  If no Forms 8606 were filed for the intervening years, the assumption is that you had no traditional IRA distributions to report for those years otherwise you've filed incorrect tax returns.

Note that TurboTax will silently delete your basis information if you ever inadvertently answer No when asked if you have such basis.  MANY people have been caught by this deficiency in TurboTax's programming, but TurboTax Product Quality just claims that this is user error.

[Karl53]

To TurboTax

Hi DanaB27, I have sent my return back to you for analysis of this issue:

   TOKEN #: 174436519-82728873  @DanaB27

Agree with you analysis and that is how I understand your program is working.

That said please respond to your statement:

                           “However, you must also make sure that you have entered your 2024 year-end balance in traditional IRAs for the calculation on Form 8606 to be performed correctly, otherwise the result will be an incorrectly high nontaxable amount due to TurboTax incorrectly assuming that your 2024 year-end balance in traditional IRAs was zero.”

Where do I enter the year-end balance in traditional  IRA’s?  I see no place to enter the amount.

Note: I have made no contributions since 2013 and have had no distributions. Yes, Turbo Tax had been carrying my basis in past years.

Again, I repeat myself, any place that it ask for the basis to be entered it calculates a refund (Step by Step, Turbo Tax Worksheet, Form 8606, repeat on Amend Return also). Nothing works.

Is there another form for a First Time Turbo Tax user to establish his basis in your program? How would they do it? Based on what I have experience with Turbo Tax they could not.  

Please let me know where specifically I can enter the basis without running a refund calculation would resolve this issue.

Thank you for your continued assistance looking into this matter.

[DanaB27]

Thank you I reviewed your token. You entered two Form 1099-Rs with code 4 but didn't indicate that they were inherited IRAs. When indicated that they were inherited IRA Form 8606 was removed. Please note TurboTax can only handle Form 8606 for your own IRAs and not for inherited IRAs. If your inherited IRA has a basis then this needs to be tracked on Form 8606 outside of TurboTax.  

Please go back to the retirement section to edit the two Form 1099-R with code 4 and indicate they were inherited on the "Do any of these situations apply to you?" screen in TurboTax Online or on the "Did XXX Inherited the IRA from XXX?" screen in TurboTax Desktop.

Note when you click continue after entering all Form 1099-Rs you no longer will be asked for the prior year basis since you had no distributions from your own Traditional IRA.

[Karl53]

Hi DanaB27

Thanks for your response. Yes there were two inherited IRA's.

There were also Traditional IRA's that Turbo Tax was tracking. 

After going back to the Retirement Section and following the questions, Code 4 was correct, but continuing on I skipped over the question did you get a distribution payment as it asked if from Fidelity where I answered no. Should have answered yes.

When answering yes it lead to additional questions on Inherited IRA's such as original owner first name.  Continuing, on, this is where you enter the basis for "Inherited IRA's".  I was focus not on "Inherited" but "Traditional" IRA's. 

To correct the issue you have to go into the "Inherited" section to make sure there is a basis.  If not, entering a basis under "Traditional" IRA's the program forces a calculation if you make an entry in the "Traditional IRA" section, as you mentioned.  When asked "if from Fidelity" saying no leads you down the wrong path.  If the question had been "did you receive a distribution from an "Inherited" IRA", it would have registered to me to respond yes.  

It is now corrected and Form 8606 is tracking my Traditional IRA Basis as well as my Roth IRA Basis.

Truly appreciate your help and thank you in helping to resolving the issue.

[gip17]

Yes, it is a bug. form 8606 only linked and used information from form 1099, but 1099 does not have full information for 8606 ( for example if you convert you traditional IRA to Roth IRA. it seemed to me the only way now if download the form 8606 and manually input them ( turbotax does not allow you manually change it in the software). but which mean we could not file the tax return online. I really hope intuit could fix the bug or let user to manually correct the form 8606 inside turbotax instead of outside. 

[DanaB27]

Can you please clarify what you are trying to do? Did you make a nondeductible contribution for 2024 and then converted the funds to a Roth IRA?

If yes, then please see How do I enter a backdoor Roth IRA conversion? for detailed instructions.

@gip17