Taxable IRA distribution worksheet line 4

[tb_2019]

This is a question regarding Taxable IRA Distribution workshhet. I converted $6972 (100% of the distribution) from my IRA to Roth in 2024. For line 1, I have $8000 traditional IRA contribution for 2024 that I will contribute in 2025 before April 15.  I have line 2, the basis as of 12/31/2023 $33480. Turbotax calculates the total basis in line 3 as the sum of the two, $41480.  My question is for line 4: in the interview, it asks the total balance of all traditional IRA as of 12/31/2024. Does that mean I should NOT include the $8000 I will contribute in 2025? It  did not say to include the 2025 contribution for 2024 in the tip. Please confirm. Thanks.

[MinhT1]

If you plan to contribute $8,000 to your Traditional IRA before April 2025 and count them as a 2024 contribution, you must add the $8,000 to your Traditional IRA balance as of 12/31/2024.

[tb_2019]

Thank you!

[tb_2019]

Sorry, I am still confused. I went to Form 8606 and its instruction. For Line 6 of Form 8606, which is the same as Turbotax Taxable IRA distribution worksheet Line 4, the instruction states clearly to enter of balance on 12/31/2024 from the statements I received in January 2025. That does not include the $8000 I will contribute.

[LindaS5247]

You are adding the $8,000 to your 12/31/2024 balance so it will be included as a contribution for 2024. The IRA contribution deadline for a given year isn't Dec. 31. Contributions for the current year can be made as late as Tax Day of the following year (April 15, 2025).

[tb_2019]

Yes, the contribution of $8000 is entered in Line 1 of both forms.

I am talking about Line 6 of Form 8606, which is the same as Turbotax Taxable IRA distribution worksheet Line 4. For Line 6, this is what IRS instruction says: "Enter the total value of all your traditional, traditional SEP, and traditional SIMPLE IRAs as of December 31, 2024, plus any outstanding rollovers. A statement should be sent to you by January 31, 2025, showing the value of each IRA on December 31, 2024." It does NOT say including the 2025 IRA contribution for 2024. Is this correct?

[RobertB4444]

The contribution that you are making is for 2024.  So if you had made it during the year it would have been included in the December 31 balance, right?  You're getting a do-over to add it to that balance even though you're putting it in late.  So you need to add it to the balance.

@tb_2019 

[tb_2019]

"The contribution that you are making is for 2024.  So if you had made it during the year it would have been included in the December 31 balance, right?" Agreed. 

"You're getting a do-over to add it to that balance even though you're putting it in late.  So you need to add it to the balance." I understand what you are saying. But if this is the case, why doesn't the 8606 instruction state that? The IRS instructions are very detailed about these special situations, like to include the 2025 contribution for 2024 on Line 1. 

[MarilynG1]

Form 8606 is for reporting your Non-Deductible Contributions.  Use Form 8606 to report distributions from your Roth IRA, a traditional IRA, a SEP IRA, or a SIMPLE IRA at any time after you have made nondeductible IRA contributions. It comes into play if you did a Back Door Roth Conversion.

Sometimes it's better to use the interview mode, and let TurboTax populate the forms.

Here's details about How to Enter a Back-Door Roth Conversion and Form 8606

@tb_2019 

[tb_2019]

Sorry that I did not explain the situation above clearly. Here is the restate of the situation and the problem I found in the TurboTax, Taxable IRA Distribution worksheet:

I have a basis carried from 2023 return in the amount B.

I made my 2024 non deductible IRA contribution in 2025 in the amount C.

I converted in the amount R from my tradition IRA to Roth in 2024.

On 12/31/2024, the total balance of all my IRA accounts is T.

I manually calculated the nontaxable portion of the conversion as B/(T+R) multiplied by R. 

I went through TurboTax interview questions, it gave me a higher nontaxable portion than I manually calculated. So I went through the Taxable IRA distribution worksheet. I found out in Line 8, it used (B+C)/(T+R)  multiplied by R, hence resulted a higher nontaxable portion.

I then manually filled out the Form 8606, it also calculated the nontaxable distribution amount as B/(T+R) multiplied by R, the same as my hand calculation. It only added C to the remaining basis from 2023 to be the new 2024 basis.
If you compare TurboTax worksheet to Form 8606, you can see that worksheet skips the step of subtracting C from the total new basis (B+C) before calculating the ratio.

My conclusion, TurboTax made a mistake in this case. How can I fix it in the software manually?

Please advise. Thank you!

[RobertB4444]

In order to make an adjustment to that you would need to use the desktop version of the program and make the change directly on the forms.  

If you are using the desktop program already just switch to FORMS view and go the 8606 and make the change.

If you are using the online version then you will need to switch to the desktop version.  Here is how to do that.

@tb_2019 

[tb_2019]

Thank you for your help!

I went to the form view on desktop and overrode 7 lines in Form 8606. The software gives me warnings on these lines and suggests me to change back. So I canceled all the overrides in Form 8606. I went to the Taxable IRA Distribution Worksheet instead and overrode Line 8 with the ratio using B/(T+R). The software went through checking for error and did not flag on the modification. Is this OK? This change should only affect Form 8606 and the taxable amount on Form 1040, and nothing else, right? Thanks again.

[baldietax]

I don't see the issue you're referring to in the worksheet, line 5 subtracts the 2025 contribution the same way 8606 is laid out, works fine when I tried.  It's unlikely there is something missing in this process and more likely this is a data issue in your return.  Have you tried going back thru the interview questions?

[tb_2019]

Thank you for sharing your experience.

Worksheet Line 5: Enter the distribution from traditional, SEP, and SIMPLE IRAs in 2024… I don’t see the subtraction of 2025 contribution on the worksheet.

Form 8606 Line 4: Enter those contributions included on Line 1 that were made from January 1, 2025, through April 15, 2025.

Form 8606 Line 5 subtracts Line 4 from Line 3…  that is the (B+C) - B in my case (before calculating the ratio).

[baldietax]

can you clarify which worksheet are you looking at?

the form 8606 generated by TT follows exactly the form 8606 you are describing, here is an example I mocked up with a 7k 2025 contribution for 2024.

8606