"Taxes owed" increased after I entered the valuation of all my IRAs, why? I am making my RMDs.

[lsowada]

Am 71 and have made my RMD exactly as required before 12.31.15, received and entered the 1099R and as I go along in "easy steps" I am requested to enter the valuation of all my traditional IRA accts as of 12.31.15 and when I do so the "amount of my taxes owed" increases significantly. Why? Why should the valuation of my tradtional IRAs (I have no ROTH or other retirement plan) increase my current year taxes due?

[dmertz · Accepted solution]

This result suggests that you have basis in nondeductible traditional IRA contributions.  Until you enter your year-end value, TurboTax cannot properly calculate the taxable portion of your distribution because it attributes an inappropriately large portion of your nontaxable basis to the distribution.

You can review this calculation on Form 8606.  The year-end value appears on line 6 which influences the result on line 10 that is the fraction of your distribution that is nontaxable.

[lsowada]

You are correct. I misunderstood the Easy Step question and entered the year end valuation as the total value of my IRAs , i.e. nondeductible and nontaxable. I have not made a nondeductible contribution since 2006 and therefore have not had any Form 8606 filed since 2006.Thank you.

[lsowada]

2015 is the first year I have been required to take RMD as I turned 70 1/2, so this was my first RMD received and reported

[dmertz]

No, you understood the question correctly the first time.  The value to enter is the combined year-end value of ALL of your traditional IRAs.  Your distribution is likely to be mostly taxable as originally calculated by TurboTax after you entered the combined total.  For determining the taxable amount, the tax code treats all of your traditional IRAs together as one large IRA.

[lsowada]

Ok, I should enter the exact total of all my traditional IRAs as stated on my 12.31.2015 year-end valuation statement from my custodian and NOT the basis of my non-deductible IRA contributions. Correct?

[dmertz]

When TurboTax asks for the total year-end value, enter the total year-end value.

When TurboTax asks you if you made nondeductible traditional IRA contributions, say Yes, then confirm or enter from line 14 of your 2006 Form 8606 your basis for years prior to 2015.

[lsowada]

Understood. Thank you for your patience and help.

[SweetieJean]

(1) The RMD is taxable.

(2) Or, the RMD was miscalculated (based on the valuation) , and you didn't take enough.

[lsowada]

(1) Yes I know this and have reported it from 1099R
(2) My custodian of all the funds calculated the amount and it is correct.