IRA distribution of basis
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Returning Member

IRA distribution of basis

I/wife are retired. only income was SS and dividend income. i took an IRA distribution from a trad IRA with basis that has been tracked each year within TurboTax. Do I need to file 8606? TT did not automatically take me there. If I enter manually, it increases my tax due. But it should be 100% non-taxable. 1099R showed 1 = 2a but 2b was checked as Taxable Amount Not Determined.

 

Seems like the basis should make distribution 100% non-taxable.

 

thanks for your help.

4 Replies
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Level 15

IRA distribution of basis

It probably will not be all not taxable.   The basis can only be pro-rated between the years distribution that the remaining year end IRA value.

 

TurboTax will automatically generate a 8606 when you enter the basis and year end value of ALL existing Traditional IRA, SEP and SIMPLE IRA accounts that existed.   Failure to enter the year end value will improperly apply all of the basis to the distribution that will guarantee a IRS future audit and a bill for back tax.

 

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

NOTE: If there is an * next to line 15 then 6-15 will be blank and the calculations will be on the "Taxable IRA Distributions worksheet instead.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Highlighted
Level 15

IRA distribution of basis

 correction: pro-rated between the year's distribution, [ and]  the remaining year end IRA value after adding back in what you took out.

Highlighted
Level 15

IRA distribution of basis

You do not add the distribution when it asks for the year end value,   TurboTax will do that automatically on the 8606 line 9 to calculate the taxable amount.    That is part of the 8606 calculations, and comes from the 1099-R for the distribution, not what you enter as the year end value.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Highlighted
Level 15

IRA distribution of basis

OK fair enough.

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