New Tax Question in Turbo Tax

[Jerry1]

I was entering some data in Turbo Tax last night and after I got done entering my 1099-R’s, I was asked the balance of all mine and my wife’s IRA’s, 401K’s, etc. It said to get it from the 5498.

I don’t recall ever getting asked this before. I don’t recall ever doing anything with my 5498’s other than filing them. Any ideas on what may have changed? I’m wonder if this is just a TT thing or if the IRS has some reason to collect this - given that they already get it.

Note, neither DW or I are 70+ so RMD’s are not in play.

[SecondCor521]

If you're able to see the tax return that TT produces, does it include a Form 8606? If so, were there any entries on any of the lines on the 8606?

Did you or your DW make a contribution to an IRA in 2021?

Usually it should only need to know that information if you're subject to the pro rata rule because of non-deductible contributions to a traditional IRA. If this is what is happening, you'll probably see entries in Part I of Form 8606.

It's possible that TT suspects you made, or have made in the past, a non-deductible contribution to an IRA. One reason for this might be if you made a traditional IRA contribution in 2021 and your income was high enough to preclude deducting the contribution.

You might just double check the entries on your 1099-Rs and make sure you put everything in exactly as shown on the form. The various checkboxes and distribution codes and entries can greatly affect what TT thinks is going on.

You might also compare the 1099-Rs you got this year to the ones you got last year to see if there were any differences between the forms' entries and checkboxes and distribution codes. Changes in your data will cause TT to behave differently.

(Not familiar with TT but somewhat familiar with tax stuff.)

[travelover]

I've encountered this for the reason stated above. My after tax contributions are so small in relation to the pretax totals it was not worth the calculation.

[Jerry1]

Thanks. I’ll look into that. We did not make any non deductible contributions. We did do ROTH conversions. But we’ve done those a couple years now and never got this question. I’ll look for an input error. Seems most likely. Thank you for the direction.

[braumeister]

I've had that question every year for a long time. Can't point to a specific reason, but it's not new.

[Montecfo]

never had that question...and loath to provide the answer.

[athena53]

Quote:

Originally Posted by braumeister I've had that question every year for a long time. Can't point to a specific reason, but it's not new.

I don't remember it, either- I would have had to add up my numbers over a couple of accounts and would likely have remembered that. I'm below RMD age and not contributing new money since my retirement in 2014.

TurboTax does collect more detail than the IRS needs. One example is detail on medical expenses- prescriptions vs. doctor and dentist fees, facility fees, etc. MAYBE they're just trying to remind you of all the expense types you can deduct but the cynical side of me thinks they're aggregating and selling the information.

[RetiredAndLovingIt]

I get asked that question every year, I just added them up from my December statements the other day.
I thought it was tracked on one of the worksheets each year because of Roth Conversions

[Jerry1]

Not sure what's going on. I do have a 8606 started. I believe it will file the 8606 to record my ROTH conversion. But, I do not see anywhere where the balance of mine and DW's IRA's/401K's is used. So, I think it's just something that TT is asking/obtaining as part of their process. Probably just another one of those things they ask because they don't know if they'll use it. Similar to asking for deductions even though I know I'll use the standard deduction. I can probably skip the question and not have any issues. I'll try that as I get closer to being able to file. Right now, I'm waiting for my last 1099.

[Alan]

Quote:

Originally Posted by RetiredAndLovingIt I get asked that question every year, I just added them up from my December statements the other day. I thought it was tracked on one of the worksheets each year because of Roth Conversions

Same here. I keep a spreadsheet with all the non deductible contributions I ever made plus the basis value from the 8606 the year before. Usually it is carried forward from the year before by TT but I am being asked a similar question this year, possibly because I had to do a mail-in return last year. When asked where I got the basis figure from I enter “line x” from last year’s 8606.

[JoeWras]

So it asks you to get it from 5498? Problem is, you don't get a good 5498 until May or so.

I've been dealing with a traditional after-tax basis on my IRA for the last few years and I calculate the total FMV of my IRAs on Dec 31 myself so I can calculate my pro-rate share during roth conversions. TT asked me this too and I gave them my calculation.

I see the 5498 as a confirmation and means of audit defense by the taxpayer, and reason for audit by the IRS.

This year I drained my tIRAs to zero with full roth conversion. So, my FMV total will be zero. I believe the IRS's computers will confirm this when they get the 5498, otherwise I'll be getting a letter.

If I took last year's 5498 (tax year 2020), my calculations would be trash.

This is how I understand it. Hope I'm not wrong.

[braumeister]

Quote:

Originally Posted by JoeWras So it asks you to get it from 5498? Problem is, you don't get a good 5498 until May or so.

I always get my 5498s in January. Perhaps your accounts have more complicated holdings that need corrected forms?

[JoeWras]

Quote:

Originally Posted by braumeister I always get my 5498s in January. Perhaps your accounts have more complicated holdings that need corrected forms?

Really? Wow. Nothing complicated. Just the moderate life strategy fund at Vanguard. Comes every May.

Here's some info on the institution deadlines on the 5498:
https://turbotax.intuit.com/tax-tips...tion/L1we1IO3U

Quote:

Form 5498: IRA Contributions Information reports your IRA contributions to the IRS. Your IRA trustee or issuer - not you - is required to file this form with the IRS by May 31.

[SecondCor521]

Quote:

Originally Posted by braumeister I always get my 5498s in January. Perhaps your accounts have more complicated holdings that need corrected forms?

I always get mine in April or May, and I understood that to be typical.

Quote:

Originally Posted by Jerry1 Not sure what's going on. I do have a 8606 started. I believe it will file the 8606 to record my ROTH conversion. But, I do not see anywhere where the balance of mine and DW's IRA's/401K's is used. So, I think it's just something that TT is asking/obtaining as part of their process. Probably just another one of those things they ask because they don't know if they'll use it. Similar to asking for deductions even though I know I'll use the standard deduction. I can probably skip the question and not have any issues. I'll try that as I get closer to being able to file. Right now, I'm waiting for my last 1099.

Form 8606 has three parts. Part II should reflect your Roth conversion. Part I is where the balances it's asking you for would be used. If Part I is blank, then I think you're right; TT could be asking for it so they can start doing the pro-rata calculations if needed.

[Jerry1]

Quote:

Originally Posted by SecondCor521 Form 8606 has three parts. Part II should reflect your Roth conversion. Part I is where the balances it's asking you for would be used. If Part I is blank, then I think you're right; TT could be asking for it so they can start doing the pro-rata calculations if needed.

Correct. Part I is blank. It just has my conversation amount in Part II. We’ll see if it files it when I’ve completed everything.

[braumeister]

Quote:

Originally Posted by SecondCor521 I always get mine in April or May, and I understood that to be typical.

Yes, I'm sorry I neglected to mention that this is with Fidelity. When we had accounts at Vanguard we also got them in April or May. We moved everything over to Fidelity in 2017, and since then they have always been issued in the third or fourth week of January.

[JoeWras]

Quote:

Originally Posted by braumeister Yes, I'm sorry I neglected to mention that this is with Fidelity. When we had accounts at Vanguard we also got them in April or May. We moved everything over to Fidelity in 2017, and since then they have always been issued in the third or fourth week of January.

Aw man, that's nice. These institutions have computers, ya know. Glad to see one is using them.

You've confirmed to me my decision to have all my IRA activity at Fidelity going forward. I'm going to have to convert a 401k to an IRA, which will be used for Roth conversions. It will not be at Vanguard.

[SecondCor521]

Quote:

Originally Posted by Jerry1 Correct. Part I is blank. It just has my conversation amount in Part II. We’ll see if it files it when I’ve completed everything.

I would expect it to file it as an attachment to your 1040. (An 8606 can be filed either with a tax return or by itself.)

[SecondCor521]

Quote:

Originally Posted by braumeister Yes, I'm sorry I neglected to mention that this is with Fidelity. When we had accounts at Vanguard we also got them in April or May. We moved everything over to Fidelity in 2017, and since then they have always been issued in the third or fourth week of January.

Ah, OK.

My 5498-generating things are at Vanguard. At the moment I don't need the 5498s for anything, so they just get filed.