Question about entering end of year value of my traditional IRA on turbotax.

[kinjeff]

Why do the taxes I owe go up when I enter the end-of-year value of my traditional IRA into the TurboTax program? I paid post-tax dollars to fund this account.  I cannot understand how the value of my account at the end of a taxable year should affect how much tax I owe.  

[AnnetteB6]

When you have more than one Traditional IRA and the accounts include both pre-tax and after-tax contributions, the total account value of all of the Traditional IRAs must be considered.  This is because each distribution from any of the Traditional IRA accounts are considered to be made up of both pre-tax and after-tax money.  This is otherwise known as the pro-rata rule.

Therefore, the total account value of all Traditional IRAs is needed in order to accurately calculate the taxable portion of your distribution.  Your taxes have gone up because part of the distribution is taxable since it is attributable to the pre-tax contributions portion of the accounts.