Turbo tax has a different IRA basis than my calculations. The calculation is wrong in 2013. How do I fix it?

[clayton]

On Form 8606, the carryover basis is incorrect.  I have traced the problem back to 2013 when Turbo Tax carried forward an inexplicable amount from the 2012 return.

I can enter the correct basis on the 2018 Form 8606, but the program wants to understand why the beginning balance doesn't reconcile with the carry over amount.  The available explanations aren't suitable.  How do I fix it?

[dmertz]

Did you take any traditional IRA distributions or do any Roth conversions between January 1, 2013 and the present?

[clayton]

No,  I only made yearly deposits.  No withdrawls or conversions of any kind.

[fanfare]

did you file form 8606 with a changing basis in any or all of the years 2014-7 ?

[clayton]

I filed form 8606 every year.  In 2012, the ending basis on form 8606 is $34,950 (Line 14).  In 2013, the beginning basis number on line 2 is $18,019.  So the number is just wrong.  Difference of $16,931.

Wish I had caught the error sooner, but I didn't.

[dmertz · Accepted solution]

You have two choices:  Either correct the amount in 2018 TurboTax and provide explanation that your 2013 Form 8606 incorrectly had $18,019 on line 2 instead of the $34,950 from line 14 of your 2012 Form 1099-R, that no distributions or conversions occurred in 2013 through 2017 and that you are correcting that by adding an adjustment of $16,931 on line 2 of your 2018 Form 8606, or file amended 2013 through 2017 Forms 8606.

Amending each of the incorrect Forms 8606 is probably more proper since it will make it explicit that none of your basis was applied to any distribution or Roth conversion.  The IRS might charge a $50 fee for each of the amended forms (this probably covers the cost of verifying that these have no effect on your tax liability for 2013 through 2017); they'll bill if they do.  However, just making the change on your 2018 tax return with explanation will probably raise less attention and might not get reviewed at all. 

In the case where you just modify the value in 2018 TurboTax, if you use the EasyGuide button just mark the first two boxes on the Any of These Apply? page.  TurboTax will prompt for explanation whether or not you use the EasyGuide button.

In the case where you amend the 2013 through 2017 Forms 8606, to avoid including any explanation with your 2018 tax return you'll need to prepare your amended the 2017 Form 8606 with 2017 TurboTax, then you'll need to clear your 2018 tax return and start over to transfer in from the amended 2017 tax file.  If you just modify the value in 2018 TurboTax without transferring in the correct amount from the amended 2017 tax file, TurboTax will still prompt you for explanation.

[fanfare]

If your basis is reported too small it means you paid more tax on a distribution than you had to. IRS will not be looking for more tax. Put in the correct number this year, and move on.
You might attach an explanation that your prior tax on distributions was too high but you are not amending. Better to let sleeping dogs lie.

[dmertz]

If you want to e-file your 2018 tax return using the correct basis but without TurboTax prompting you to provide an explanation, you would have to clear your 2018 tax return, start over and not transfer in your 2017 tax file.  This would require you to manually enter any other information from your 2017 tax file that needs to transfer, perhaps not a good solution.  Otherwise you could prepare the explanation but print and mail your 2018 tax return, omitting the explanation page (or portion of page).  I think explanation should be included, though.

[clayton]

Thanks