How to report a change in traditional IRA cost basis to IRS

[mgreen10]

I have a traditional IRA that includes $8,000 of after-tax, non-deductible contributions. That means my traditional IRA has a cost basis of $8,000 which is shown on the last Form 8606 I filed which was for tax year 2020.

In 2024 I did a Roth conversion of about $95K. I want $8K of the conversion to be the after-tax, non-deductible contributions. This means $87K is a taxable Roth conversion and $8K is a tax-free conversion. When I tried to enter this 1099-R in Turbo Tax, it told me to delete the single 1099-R and create two 1099-R's--one for the taxable conversion and one for the non-taxable conversion--that together add up to the single 1099-R. I did this.

I thought this would trigger a new Form 8606 in my 2024 tax return to indicate that my IRA cost basis is now $0 but that did not happen. How do I report to Turbo Tax and the IRS that the new cost basis for my traditional IRA is now $0?

[fanfare]

" I want $8K of the conversion to be the after-tax, non-deductible contributions."

Not something you can control

Unless you converted 100% of the IRA to Roth . This is not possible.

Formn 8606 Line 13 shows the the non-taxable part of your distribution.

@mgreen10 

[mgreen10]

Currently there is no Form 8606 in my return. Are you saying that I should delete the two 1099-R's I created and re-enter the original, actual 1099-R from my IRA custodian, then Turbo Tax will add Form 8606 with the updated cost basis?

Thanks!

[fanfare]

Yes.

" $8,000 which is shown on the last Form 8606"

In the interview,you must enter this prior years basis, then Form 8606 will be used

@mgreen10 

[Mike9241]

the problem is that the last 8606 you filed was in 2020. since you did not include it in your 2021 or subsequent returns, Turbotax does not know you have a tax basis. You'll have to create an 8606 for 2024 to reflect your tax basis.

unless you rolled all your IRAs into that Roth only a pro rata portion of your basis will reflected. 

[dmertz]

Basis in nondeductible traditional IRA contributions is carried forward in TurboTax on TurboTax's IRA Information worksheet, so not needing to file Form 8606 for a particular year has no bearing on TurboTax continuing to carry this information forward.  What can happen is either you prepare a tax return without transferring in the previous years TurboTax file or you inadvertently answer No when TurboTax asks if you have such basis, causing TurboTax to silently delete this information that was carried forward.

With regard to splitting the Form 1099-R, that's only necessary if you took a distribution from the traditional IRA and converted part of the distribution and rolled over another part of the distribution.  If you didn't convert all of your traditional IRA funds to Roth and still had funds in a traditional IRA at year end, the calculation on Form 8606 cannot allocate all $8,000 of your basis to your otherwise taxable traditional IRA distributions.