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wab9
Level 2

Non-taxable IRA distribution

In 2022 I put after tax money into a newly created IRA with the plan to use that to fund a "back door" Roth. I ended up deciding not to do that. In 2023 I took that money out of that IRA.  The distribution included the amount I put in plus a small amount of interest earned on those funds. Fidelity has sent me a 1099-R form that shows the total amount distributed in boxes 1 and 2a. Box 2b indicates that the taxable amount was not determined, and that this is a total distribution. When I enter all of this into TurboTax, it considers all of it to be taxable. I would very much appreciate some guidance as to how to enter this in a way to indicate that the principal amount is not taxable and that only the earnings are taxable. Thank you very much.

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Hal_Al
Level 15

Non-taxable IRA distribution

4 Replies
Hal_Al
Level 15

Non-taxable IRA distribution

I assume you have no other Traditional IRAs.  If you do, your distribution is not tax free.

 

After entering your 1099-R (a little later, not immediately), you will be asked if you ever made any non-deductible (after tax) contributions to your IRAs. That's where you will enter you "basis".  Note that you will also be asked for you year end balance in ALL your traditional IRAs. 

 

The calculation of the taxable amount (the earnings) will show on form 8606. 

wab9
Level 2

Non-taxable IRA distribution

Thank you for your reply. I got to that part after my initial post.  It appears that I should have filed a form 8606 last year when I made the contribution to the IRA with taxed dollars. I didn't do that. At this point, do I have any alternative to paying taxes on the entire distribution even though I have already paid taxes on the majority of it in the past?

Hal_Al
Level 15

Non-taxable IRA distribution

wab9
Level 2

Non-taxable IRA distribution

Thanks so much! Very helpful.

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