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cpowell17
Returning Member

TurboTax Software bug found in 2022 ROTH distribution tax determination

Turbotax software has a bug in their software that determines taxable value of ROTH IRA Distribution with the following data.

2022 1099-R 

Box1: 53500

Box 2b: X (selected)

Box7: T

My data:

                                          2020      2021      2022     Total

Roth Conversion basis17200    30000    30000   77200

 

The TT Premier "easy step" software walks me through the query used to fill in the Form 8606.  It only asks for cost basis for 2020 and 2021.  So I end up with a total cost basis of 47200.  This leaves me with a taxable amount of $6300.

 

TT Easy step never asks me to enter a cost basis for 2022.  I dug around and found the worksheet they use for the calculations, and saw a field for “2022” Roth conversion but it is a “read only” field.

 

I downloaded the IRS Form 8606 with instructions and I manually filled out the form.  It shows that I have $0 taxable.  All 53500 is tax free.

 

I used the Free online software and it also provided me with the correct results.  

 

I tried 3 times to reach someone but kept getting cut off.

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4 Replies
dmertz
Level 15

TurboTax Software bug found in 2022 ROTH distribution tax determination

There is no bug.  2022 TurboTax gets your 2022 Roth conversion basis from the entry of the 2022 Form 1099-R that reports the Roth conversion.

cpowell17
Returning Member

TurboTax Software bug found in 2022 ROTH distribution tax determination

Basis data is NOT provided on a 1099-R with Box 7: distribution code = 7.

 

The broker does not provide the data as the calculations may involve holdings in several different broker accounts, banks, etc.

 

If you create a 1099-R in Turbotax and enter the data I provided and run the easy step you will see that it does not ask or allow you to enter the basis data for 2022.

 

Look up IRS Form 8606 (2022) along with instructions.

 

Part III, Line 22 of the instructions provides directions for supplying cost basis.  "Enter on line 22 the total of all your regular contributions to ROTH IRAs for 1998 through 2022".  Turbotax provides prompts to enter basis through 2021.  The 2022 version of Turbotax does NOT prompt for 2022 cost basis.

 

That is a BUG.

 

cpowell17
Returning Member

TurboTax Software bug found in 2022 ROTH distribution tax determination

Typo correction from my previous post... Box 7, Distribution code=T

 

This leads to Form 8606 query to supply Cost Basis to determine Taxable amount of distribution...TurboTax returns incorrect result.

dmertz
Level 15

TurboTax Software bug found in 2022 ROTH distribution tax determination

There is no bug.  You have not entered the 2022 Roth conversion correctly if the $30,000 Roth conversion performed in 2022 is not present on lines 59 and 60 of 2022 TurboTax's IRA Information Worksheet.  If not entered correctly, your 2022 Roth conversion will also be absent from Part II of your 2022 Form 8606 where it is required to reported.

 

If you did a $30,000 Roth conversion in 2022 as you indicated in your original post, you will have a 2022 Form 1099-R, with code 1, 2 or 7 that reports the distribution from the traditional IRA.  When you enter this Form 1099-R, indicate that you moved the money to another retirement account, and indicate the amount converted to Roth (in the CD/download version of TurboTax you must first indicate that you did a combination of rolling over, converting and cashing out, then you can enter the amount converted to Roth), TurboTax will add to your 2022 Roth conversion basis the amount that you indicated that you converted to Roth.

 

The reason that you can't enter the 2022 conversion basis directly on the IRA Information Worksheet in 2022 TurboTax is because the amount converted in 2022 must be entered via the Form 1099-R as I indicated above.

 

I have such a Roth conversion reported on my own 2022 tax return.  The amount is properly included on lines 59 and 60 of my IRA Information Worksheet (part of my 2022 Roth conversion was nontaxable) and appears in Part II of my 2022 Form 8606.  If I enter a code-T 2022 Form 1099-R and indicate that I have not had a Roth IRA for 5 years, TurboTax properly prepares Form 8606 Part III and includes my 2022 conversion basis on line 24.

 

(If this was instead rollover to a Roth IRA from a traditional account in a qualified retirement plan like a 401(k), TurboTax will still properly add to the 2022 Roth IRA conversion basis when you indicate that it was rolled over to a Roth IRA.)

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