When will Form 8915-E be available? TurboTax indicates "IRS instructions related to disaster distributions weren't ready in time for this release." It's been weeks now.

[macuser_22]

@nolanwittrock Actually when  I think about it, in a normal year the amount of any Traditional IRA distribution will add to your MAGI and put you over the IRA deduction limit.   I see no reason that just because you can pay it back that it should not still add to the MAGI and make your contribution non-deductible.

I believe the 8606 and non-deductible contribution  is correct.

[nolanwittrock]

@macuser_22 

Under a normal year I think you would be right.  However, my understanding is that if you have paid back a Covid withdrawal, because of the special rules from the CARES act, the amount that you paid back does not count as income at all. If I withdrew 30k and paid back 30k, you have zero income. Your MAGI should not increase in this scenario.

[macuser_22]

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@nolanwittrock wrote:

@macuser_22 

Under a normal year I think you would be right.  However, my understanding is that if you have paid back a Covid withdrawal, because of the special rules from the CARES act, the amount that you paid back does not count as income at all. If I withdrew 30k and paid back 30k, you have zero income. Your MAGI should not increase in this scenario.

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That would be true for a rollover - it does not count as income.   However the CARES Act "repayment" is not a rollover.  It simply allows you to repay (replace)  the distribution with other money over a 3 year period, but it is still a distribution.

[macuser_22]

@dmertz - what do you think?

[nolanwittrock]

@macuser_22 

It is a distribution, but if you repay it, it is not considered to be income.

Turbotax is not (in general) treating a distribution that I have repaid as income. If I simply don't report that I made a $6k IRA contribution, all the numbers are correct, and my 1040 does not show the Covid withdrawal as part of my income. My adjusted gross income is $116,480.

Only when I report the $6k IRA contribution does Turbotax think that my entire Covid withdrawal needs to be included with my taxable income, which bumps by AGI to over $206,000.

The fact that I made an IRA contribution shouldn't change whether or not the Covid withdrawal is taxable income, but an error with TurboTax is forcing it to.

[macuser_22]

As I said above, your taxable income on line 4b will drop to zero if you make the 8606 line15b the same as 15a.

[dmertz]

@macuser_22 

@nolanwittrock 

This behavior looks correct to me, assuming that the correct entry on Form 8606 line 15b has been made ($92,008).

Repayment of a CRD is not the same as an ordinary rollover because the repayment can be made up to the due date of your tax return, including extensions, long after the normal 60-day rollover deadline, so repayment of a CRD should not reduce MAGI.

If the repayment was made within 60 days of the distribution (or by July 15 due to the extension of the 60-day deadline due to the disaster declaration), that portion of the distribution can potentially be reported as a regular rollover and not a CRD, reducing MAGI.

[nolanwittrock]

@macuser_22 

@dmertz 

The behavior cannot be correct, one way or another.

If I tell TurboTax that I didn't make an IRA contribution, it tells me that my MAGI is $122,519. It is not including ANY portion of my Covid withdrawal in my MAGI calculation.

If I tell TurboTax that I did make a $6,000 IRA contribution, it tells me that my MAGI is $214,527 because it suddenly does include the Covid withdrawal.

The inclusion of the Covid withdrawal in my income should NOT be effected by whether or not I'm making an IRA contribution. That doesn't make sense.

[dmertz]

MAGI for what purpose?  With no traditional IRA contribution there is no need for a MAGI for the purpose of a traditional IRA contribution.

Is your spouse making an IRA contribution? 

Where are you seeing a display of MAGI when you have entered no traditional IRA contribution?  There are many types of MAGI, all calculated differently for different purposes.

Apparently you are using the online version, so if TurboTax is displaying a useless MAGI, I would just ignore it.  Summary displays in TurboTax are frequently flawed or misleading.  Because these display flaws don't affect the filed tax return, there is little incentive for Intuit to give such problems any consideration.

[nolanwittrock]

@dmertz 

Yes, my spouse is also making a $6,000 Roth IRA contribution.

The MAGI shows up on the IRA contribution worksheets. I agree with you, I'm not actually concerned about this MAGI number

However, adding in my own Trad IRA contribution also completely changes my AGI on Line 11 of my 1040. With my contribution, my AGI is $214,527. No IRA contribution, AGI is $122,480.

Now, I understand that this is an issue with how TurboTax is putting together the Form 8606. My first point is that this is a serious issue that hopefully TurboTax corrects.

But my second point is that TurboxTax, in creating your 1040, is NOT treating a Covid withdrawal as income, whether that be in the AGI or MAGI calculation. The AGI, of course, appears on the filed tax return, so that seems like a big deal to me if it is wrong.

[macuser_22]

@dmertz

Here is the deduction  worksheet with the MAGI line 12.

And @nolanwittrock - NOTE that my final tax and yours will be different because I do not know the correct year end value of all Traditional IRA's to enter so it can be properly prorated on the 8606 form (actually the "Taxable IRA worksheet" because there was a contribution and distribution  i n the same year)  I just guessed at $100,000 for my test.

And the poster said that he indeed did have a Trad contribution that the thought would be deductible but because the new MAGI is not.

Personally, I believe it is correct because this is a distribution, not a rollover.

[dmertz]

@nolanwittrock , the behavior you are seeing would happen if you have not put $92,008 on Form 8606 line 15b.  If you previously made the entry of $92,008 on line 15b (via the error flagged during review), it seems that it has disappeared and you'll need to do the review again to reenter the $92,008.  If the review doesn't flag an error, delete the Form 8606 and do the review again so that TurboTax will flag the error and allow you to enter the $92,008.

To delete a form, click Tax Tools -> Tools -> Delete a form, then click the delete link next to the form in the list.

[macuser_22]

In my example the 2020 tax on the 1040 line 4b and 8606 line 15c is $3,030 with my assumptions.

[nolanwittrock]

@dmertz 

@macuser_22 

Sorry if this sounds argumentative.

I've got the Form 8606 issue figured out.  My point right now is simply that TurboTax is not including the Covid IRA distribution as part of my AGI because it is not taxable.  After making the Form 8606 line 15b correction, my 1040 Line 4a says - IRA distributions $98,008.  Line 4b - Taxable amount $0.  Line 11 AGI is $122,480. This seems correct to me. IRS guidance states that only the taxable amount of any IRA distributions are included in AGI.

However, when you get to the MAGI calculation on the IRA worksheet, TurboTax adds back in the Covid IRA distribution, making my MAGI $214,527.  

If you can point me to IRS guidance stating that a non-taxable IRA distribution needs to be added back in to calculate MAGI, then we will all be on the same page. I have found no such guidance, so I think this MAGI number is wrong, and therefore my Traditional IRA contribution should still be deductible.

[taxcfp]

I'm using Home and Business Desktop and the 8915 is not yet available.  I've done all the available updates, but it is treating my 1099-R like a normal distribution with not option to spread over 3 years or waive the 10% penalty.