Early Distribution of Non Deductible IRA - No Turbotax option to avoid being taxed twice

[jeremy10]

in 2020 I took an early distribution of my 2018 contribution to a non-deductible IRA. My 2020 1099-R has the same dollar amount in both box 1 and box 2a. Box 2b has Taxable amount not determined checked. The distribution code in box 7 is 1. When I enter this information into TurboTax I am charged tax on the full amount, since this was money from a non-deductible IRA I already paid taxes on it and I shouldn't need to pay taxes a second time, I should only need take an early withdrawal penalty.

I am not sure how to fill this out in TurboTax premier. I don't see an option to mark the withdraw as being from a non deductible IRA.

I also took an early destruction of my 2019 contributions to a non-deductible IRA, My 2020 1099-R had code 1P in box 7 so this had no effect on my 2020 taxes, I just need to amend my 2019 taxes. Would the early withdraw of 2018 money be the same thing where it doesn't effect my 2020 taxes but I need to amend my 2018 taxes? Also do I need I need to update my form 8606's for 2018 and 2019?

[DanaB27]

If you had reported the nondeductible contributions on Form 8606 on your 2018 and 2019 tax returns then you do not need to update the Form 8606 for 2018 and 2019.

Yes, the 2020 1099-R with code 1P belongs on your 2019 return. you will need to amend the 2019 return. Please see How do I amend my 2019 return?

No, you do not need to amend your 2018 taxes because of the 1099-R. That 1099-R belongs on your 2020 tax return. Please follow these steps to enter the 1099-R with code 1:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Click "Continue" and enter the information from your 1099-R
5. On the "Your 1099-R Entries" screen click "continue"
6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis and value

Part of the distribution will be allocated to the nondeductible amount (basis) and be tax-free. 

[jeremy10]

I entered all information as it appears in my 1099-R and the option for stating that it was non-deductible contributions does not appear.

Also in the "Identify the type of plans [myname] withdrew money" I only checked the "IRA" box but whenever I go back to the screen both the "IRA" and "Qualified retirement plan (e.g., pensions, 401(k)s and 403(b)s)" boxes are checked even though I never checked the "Qualified retirement plan (e.g., pensions, 401(k)s and 403(b)s)" box

[jeremy10]

Someone told me that because box 2b of my 1099-R "Taxable Amount not determined" the correct thing to do is change the value in box 2a (Taxable Amount) to 0. When I go this I get the intended outcome of not being double taxed on distribution however the turbotax software is not happy with this and keeps identifying it as a problem I need to fix.

In 2020 I purchased my first house and I ended that amount of the IRA early distribution as the amount that I withdrew from an ira to use for the purchase of my house, this only reduced my taxes by $4.00, should have this reduced my removing the 10% penalty on the early distribution.

[BillM223]

@jeremy10 

"non-deductible IRA" - by this, do you mean a Roth IRA, or a traditional IRA into which you put non-deductible contributions?

Do you have other traditional IRAs into which you put deductible contributions?

[johmarwil07]

To make sure to check the back of your W-2 for all explanations on your filing, related to that W-2.  Do any of the boxes 12-14, of your W-2 form, have any checks or letters in them? Make sure if they do, the information is entered accurately? Either on your taxes, or, the W-2 form? Is just a start, a few things to check first. 

[jeremy10]

By non-deductible IRA I mean a money in a traditonal IRA that I already paid taxes on (https://www.investopedia.com/retirement/should-you-contribute-nondeductible-ira/)

I could not contribute to a roth or a deductible traditional IRA due to income limits.

I paid for turbotax live and got the solution. My taxes werent including a form 8606 so I needed to force turbotax to include one by following these steps https://ttlc.intuit.com/community/accessing/help/where-do-i-find-form-8606/00/25713

[macuser_22]

If this was a 2018 non-deductible contribution then  you should have a 2018 8606 form showing that on line1.

If you did not report the non deductible contribution on a 2018 8606 form (line 1)  then you need to amend 2018 to include it.