MAGI calculation for ROTH Contribution

Forum|Forum|2 years ago
February 20, 2024
2 replies
24 views

Line 1 of the Roth IRA Contribution Limit Worksheet is incorrectly calculating MAGI... it appears to be subtracting inherited IRA distributions (in addition to IRA Roth conversions). Why ?

also affects the Traditional IRA deduction, inherited IRA distributions are being subtracted from the MAGI caclculation in error.

dmertz

Level 15

Wow! You are right! Very observant! My own tax return shows the same problem.

Perhaps @BillM223 can help in reporting this bug.

I'll do a bit of research to see how long the bug has been present in TurboTax, but I suspect it's been there for a LONG time since it's not something that one would readily notice. Of course somebody who did not actually make an excess Roth IRA contribution would not care.

shmc Author

Level 2

it's been there since at least 2021, an error in the taxpayer's favor since it lowers the MAGI more than it should.

dmertz

Level 15

The error is not exactly in the taxpayer's favor since, if TurboTax fails to recognize an actually excess contribution due to this bug, the excess-contribution penalties can accumulate without the taxpayer's knowledge. At least the SECURE 2.0 Act has created a statute of limitations for the IRS to be able to assess excess-contribution penalties, but the IRS has not yet provided guidance on how that statute of limitations will be applied.

shmc Author

Level 2

This issue has now been solved for both IRA deduction and ROTH contribution.

dmertz

Level 15

I see that it has been fixed for making a Roth IRA contribution, but not for deducting a traditional IRA contribution.

shmc Author

Level 2

hmmm , in my file it is showing the correct MAGI now when making a deductible IRA contribution. I have a test file with a before and after and the MAGI did change.