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.
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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.
it's been there since at least 2021, an error in the taxpayer's favor since it lowers the MAGI more than it should.
Not as log ago as I expected. This bug was introduced with an update to 2021 TurboTax and remains present in 2022 and 2023 TurboTax. It was not present in 2021 TurboTax on 3/19/2022 when I filed but is present in the last update to 2021 TurboTax.
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.
Thanks for the note. Any additional information you can provide here (or through other channels) would be appreciated.
The same is happening on Line 12 of the IRA Deduction Worksheet. I am missing something when it comes to how inherited IRA distributions are treated.
@dmertz it has been suggested to me that I get a sanitized return from you of a test case that acts the way you describe. Can you do that?
Of course, you don't need to do any of the sanitizing; the TurboTax sanitation process while creating a token works very well...sometimes too well.
Let me know if you can do this for us.
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In trying to create a stripped-down version of a tax return, so far I have not been able to reproduce the problem that is shown in my personal tax return by building a new tax return, likely due to some interdependency with something that should be unrelated. My personal tax return has more in it than I want to include in even a sanitized submission, so it will take me some time to figure out the interdependency and make the submission. I think it has something to do with other Forms 1099-R that are present because if I delete those the symptom disappears. I'll make the submission when I have something suitable.
OK, I got it. Token 1190388.
In this test file, the MAGI shown on the Roth IRA Contribution Limit Worksheet should be $250,000, not $50,000.
Recreating the problem required including a Form 1099-R for a Roth conversion from a traditional IRA and having basis in nondeductible traditional IRA contributions. Got lucky in being able to initially see this symptom since my own personal tax return includes the necessary elements.
@BillM223 , tagging you just to make sure.
Thanks for the token.
@BillM223 I also uploaded a version of my file with both a ROTH IRA contribution and a Traditional IRA contribution so you can see both MAGI's on the worksheets . token number 1190456
Thanks @shmc
Not realizing the interdependencies, my previous testing to determine when this bug got introduced was incomplete. It now appears to me that it was introduced in 2020 TurboTax.
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