I turned 71 in June 2019; 70 1/2 in mid December. I completed all my RMD by Dec 31. In entering data from payor 1099-R, Turbo Tax asked me for my Cost Basis and Total RMD Balance AS OF December 31 of THIS year. All IRS documentation I can find indicates balances and subsequent RMD is based on PRIOR year (2018). The TurboTax input not only under calculates my total RMD, but also my non-taxable portion as Cost Basis percentages change.
What am I missing? Should I just use my 2018 figures even though I've been asked for 2019?
If you indicated that you have a "basis" (non-deductible contributions) in the IRA then that questions has *nothing* to do with a RMD. (The 2019 RMD amount itself is based on the 2018 total value).
Knowing the total aggregate December 31, 2019 value of all Traditional, SEP and SIMPLE IRA accounts allows TurboTax to prorate the non-taxable basis between the 2019 distribution and remaining IRA value. That is done for any 2019 IRA distribution whether a RMD or not.
====Enter a 1099-R here:
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).
OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.
Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.
[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]
You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.
That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.
Thanks, but I think I'm lacking clarity because I can't use actual figures. Let's try this:
A=Total Cost Basis as reported on final 8606
B=Aggregate IRA funds subject to RMD on DEC 31, 2018
C=Aggregate IRA funds subject to RMD on DEC 31, 2019 (required by 2019 TT)
X=RMD taken this year upon age 70 1/2
MY calculation for nontaxable 2019 distributions derived: (A/B)*X
TT Premier derived calculation from 2019 8606: (A/(C+X))*X
Note that it not only uses a (significantly higher) 2019 Aggregate (vs 2018), but additionally it ADDS the RMD to that basis in the denominator.
These numbers might be used for future proration, but the difference I've cited on 2019 8606 result in an additional several hundred dollars in taxable income this year's filing.
The first year really shouldn't be this difficult, should it? I understand in the future the cost basis will be reduced by the non-taxable amount used this and subsequent years but I have provided for that in my spreadsheet calculations.
TurboTax is correct - the distribution is added back to determine the correct percentage.
Again being a RMD is irrelevant. Nothing about a RMD goes on a tax return at all. All IRA distributions are the same, RMD or not.
Taking simple figures and assuming no gains or losses. Assume that you have a IRA valued at $100,000 with a $10,000 basis and you take a $10,000 distribution in 2019. Since you are taking 10% of the total value then 10% of the basis (or $1,000) should apply to the distribution so the taxable amount should b e $9,000 leaving $9,000 of basis in the account.
To calculate that the IRS (and TurboTax), on the 8606 form, adds the year end value ($90,000) plus the $10,000 distribution and divides by the distribution. (($90,000 +$10,000) / $10,000) = .1 or 10%. The $10,000 basis is then multiplied by the .1 to get $1,000 - the non-taxable amount.
By doing it this way any gains or losses that affect the years end value are accounted for since it would be slightly more or less than an exact 10%. Unless the distribution is added back in then the ratio of the distribution to the whole cannot be calculated.
See the 8606 for the calculations.