Question on Form 8606 Lines 1 , 2 , and 8

[cririuss_ca]

I  did a Rollover IRA (pre tax) to a Roth IRA conversion in 2025.   This is the first time I done any  Roth IRA activity  - and I never did a Roth IRA contribution before.  .

I received a 1099-R form from my financial institution documenting the Roth IRA conversion activity, with BOX 7 showing Code 2  and the IRA/SEP IRA box CHECKED.  .   

I entered  the 1099-R information into the 2025 Turbo Tax software, which in turn generated a Form 8606 form.

Basically I moved $20K from my pre-tax Rollover IRA into my new Roth IRA account. 

I checked the Form 8606 and  see the following:

Line 1 (nondeductible contributions to traditional IRAs for 2025) shows BLANK  (correct)

Line 8  (net amount converted from traditional IRAs to Roth IRAs in 2025)   correctly shows  the amount of $20K.

However, line 2 (total basis in traditional IRAs) shows $ 4000.   

Can someone explain how  the total basis is being computed?  I need to understand.    

[cririuss_ca]

I could not update my post,  I was going to say why Line 2 shows $4000 when it is the first time I am doing a Roth Conversion - it should have been zero, correct?  

I am using TurboTax  software to file my income tax.   Thought I’d  share  the series of questions from Turbo Tax  pertaining to my Roth Conversion and my responses (AFTER I entered my Roth IRA Conversion 1099-R data) in chronological order (I took $20K from my Rollover IRA for the Roth Conversion for Tax Year 2025).

The Turbo Tax questions are in bolded text with my responses underlined as follows:

1. Question: Do any of these situations apply to you?  (Multiple choice answers listed below)

• (no) I took out this money due to a qualified disaster

• (no) I inherited this IRA

• (no) This is for a SIMPLE IRA within the first two years of participation only

• (no) This is for a SIMPLE IRA with more than two years of participation

• (no) This is for a SEP IRA

• (no) I moved some or all of this money to my HSA as a one-time contribution

• (no) I need to file a substitute 1099-R

• (no) The corrected box is checked on this 1099-R

• (YES) None of these apply

2.  Question: Tell us if you moved the money through a rollover or conversion”  (multiple choice response)

     I  selected  “I converted some or all of it to a Roth IRA” 

3. Question:  "Did you convert all of this $20,000.00 (Box 1) to a Roth IRA?”   YES

4.  Question  "Did you have any nondeductible IRA contributions to your traditional IRA from 2024 or prior years?”   NO

5.   Question “Enter the total value of all of your traditional IRA, SEP, and SIMPLE IRA accounts on December 31, 2025. This information is sent by mail on Form 5498. Do not include Roth IRAs”  I entered the total amount value of all my  existing pre-tax traditional IRA accounts 

I  skipped the last question pertaining to  “Canadian Registered Pension Income” as it doesn't apply to me.

Did I make any mistake in any of my responses from  questions 1 and 5 that would prompt TurboTax to generate the cost basis for my Roth Conversion? 

UPDATE: I checked the “IRA Information Worksheet”  line 1  “Total Basis in traditional IRAs” in my  TurboTax returns from 2017 thru 2024, and they are all showing the same value of $4000.  

[baldietax]

Line 2 is the basis in Trad IRAs (nothing to do with Roth) from prior years, it's after-tax money from a non-deductible contribution, did you make such contribution?  It's filled in automatically if you carried over your 2024 return data, from your last Form 8606 Line 14.  There is also an interview question when you put in the Roth conversion whether you had previous non-deductible contributions and tracked the basis which would have shown the $4000.

When you do a Roth conversion and have basis in the IRA then the conversion is considered taken from pre-tax and after-tax money in a pro rata manner (calculated on Form 8606 Lines 9-12) and you will be asked to provide the market value of all your Trad IRAs as of 12/31/25 for Form 8606 Line 6 (which you should get from your brokerage statements - Turbotax will prompt to use Form 5498 which is misleading as those are usually not sent out til May).  Note this is considered across all Trad IRAs if you have multiple accounts, not just the account the conversion is taken from.

[cririuss_ca]

Thank you Baldietax for your response.

I  had only done pre-tax distributions  (to take advantage of lowering my income) but  I have not done after-tax distributions.  

[baldietax]

Just to confirm, I'm referring to after-tax contributions not "distributions".  You've never made a non-deductible contribution?  Any 401k rollovers with after-tax money (the round $4000 sounds more like a contribution tho).  Did you previously file a form 8606 in 2024 or prior year?  Do you have any prior Form 5498s showing contributions?

Turbotax has certainly had a few issues this year - but it's most likely getting the $4000 from your 2024 data carryover.

If you are on desktop you can check in Forms mode on the IRA Information Worksheet or the Carryover Worksheet to see where the $4000 is coming from.  With Online I think you can check in the PDF with "all forms and worksheets".

If the $4000 is truly incorrect you can provide the correct basis in the questions after the 1099-R input or go to the Deductions & Credits / Traditional and Roth IRA Contributions where that question will also come up.  But I would be careful to track down where the $4000 is coming from and not give it up unless certain it's an error as you could be losing out on a non-taxable portion of distributions/conversions.

[cririuss_ca]

Hi BaldieTax, 

"Just to confirm, I'm referring to after-tax contributions not “distributions. You've never made a non-deductible contribution?”   Yes that is correct, I had never made a  non-deductible contribution.   Any 401k rollovers with after-tax money (the round $4000 sounds more like a contribution tho).  

Did you previously file a form 8606 in 2024 or prior year?  No  

"Do you have any prior Form 5498s showing contributions? "  Yes  I now see two older  Form 5498 docs from my Fidelity account - tax year 2020 recording the rollover actvity  and Tax Year 2021  showing one line item for IRA contribution and a rollover contribution that I made that year.   Addendum:  there is a 1099-R form for the 2021 Form 5498 rollover contribution where the 1099-R form shows Code G (for distribution) and line 2 Taxable Amount shows ZERO.  

"If you are on desktop you can check in Forms mode on the IRA Information Worksheet or the Carryover Worksheet to see where the $4000 is coming from.  With Online I think you can check in the PDF with all forms and worksheets”.  I checked all my TurboTax documents from 2024 to way back in 2017 (I had purged the older Turbo Tax document)  and their  IRA Information Worksheet  page all show the same “Total Basis in traditional IRAs” value of $4000.     My personal IRA was from Ameritrade was automatically transferred to Schwab when Ameritrade closed down and Schwab only keeps its records for the last 10 years.    

Wondering if there is any other way to find out where the $4000 cost basis is calculated. 

[baldietax]

ok sounds like you've consistently been carrying that basis for a while, since before 2017 - if you don't have the old returns or Ameritrade statements and can't get back any of that data, you could try your bank records if those go back further for some record of $4000 being transferred but it depends how you funded it.

Not sure what else to suggest - but don't purge this stuff (keep the return PDF with all forms and worksheets, the .tax files are useless over time as the s/w is not supported after 4 years).

I think Form 8606 only generates if there is activity so if you made this contribution a long time ago and never did one since, it's easy to lose track year to year.

[cririuss_ca]

thanks again BaldieTax.

The online bank statements go back only to 2019.    I am kinda thinking if  should just override the total basis to zero as I dont have the supporting documentation to prove the $4000 tax basis? 

[baldietax]

I can't advise on that but paging others in case they can help further

@dmertz @Mike9241 @mesquitebean @DoninGA @VolvoGirl 

[cririuss_ca]

thank you @baldietax  appreciate it

[dmertz]

The $4,000 on line 2 of Form 8606 came from a user entry, either explicitly entered into 2025 TurboTax when it asks for basis from contributions made before 2025, or carried in on the IRA Information Worksheet from having been similarly entered into TurboTax for some previous year or from actually reporting a nondeductible traditional IRA contribution in some previous year.  (If a nondeductible traditional IRA contribution had been reported in some previous year, it would have been reported on Form 8606.)  Since you don't remember doing either, either method of having created the basis information is possible.

If you truly believe that you have no such basis, you can continue from the page that list the Forms 1099-R that you have entered and when TurboTax asks if you made nondeductible traditional IRA contributions, answer No.  That should cause TurboTax to erase that $4,000 from the IRA Information Worksheet.  You can confirm that that has happened by seeing that Part I of Form 8606 no longer has anything in it and Part II of Form 8606 shows the entire Roth conversion as being taxable.

[cririuss_ca]

Hi @dmertz  thanks for your input!

On  the page that list the Forms 1099-R for my Roth Conversion I did answer No to the question "Did you have any nondeductible IRA contributions to your traditional IRA from 2024 or prior years?”  

I think  the 8606 Line 2  entry comes from the  IRA Information Worksheet form in TurboTax desktop (see image below).   Hope someone can confirm this? 

There seems to be a way to  override the IRA Information Worksheet to change the $4000 to zero to fi my current issue.  Wonder if I could just clear it out and would that change the 8606 basis to zero?   

[baldietax]

I think if you say "Yes" to that question instead of No you will get the box showing $4000 and can set it to $0.

Or adjust it on the worksheet if it will let you edit.

[dmertz]

Look at Part III of the IRA Information Worksheet to see if it shows $4,000 there.  Any amount there would either have been transferred in from line 3 of the 2024 IRA Information Worksheet or an amount that you entered into 2024 TurboTax.  You might try answering Yes when TurboTax asks if you made nondeductible traditional IRA contributions and then altering or deleting any amount that TurboTax show as the amount.

If you made no traditional or Roth IRA contributions for 2025, make sure that your tax return does not include any IRA Contribution Worksheet.  Delete the IRA Contribution Worksheet if present.

[cririuss_ca]

｜thank you gentlemen @baldietax @dmertz  Am leaving for a scheduled short trip today will be back tomorrow and try this .