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This is for 2018 - The worksheet that goes with the 1099-R for 2018 is not like the one for 2017
Solved! Go to Solution.
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I had a few minutes this morning so I played around with this, it still works fine for me exactly as it has in the past. Again, this is NOT a recharacterization, it's a conversion from traditional IRA (with basis) to Roth IRA. You've been entering it wrong.
Screenshots attached.
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Turns out I didn't need to enter the $0 ending FMV. Personally, if I were programming it, that would be a requirement for any conversion with basis. PS assumes $0 if you leave it blank, I agree with itonewbie, that's a really bad thing to assume. If you do put a number in there (it's on the IRA Info Wks), it does correctly allocate basis. But IMO, a non-entry should be an incomplete calculation.
Rick
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rbynaker - Can you please advise on how I can view your screenshots?
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Sorry, they didn't survive the "upgrade" to the new forum.
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Does your client have money in the IRA in addition to the amount you are converting?
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This worked. Helpful input.
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pdlang55, TCJA did not shut down back-door Roth IRA, only recharacterization (i.e. unwinding) of conversion (see §408A(d)(6)(B)(iii)). Roth IRA conversion has always been taxable based on the normal rules except the 10% early distribution penalty does not apply (see §408A(d)(3)).
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I think your 8606s have probably been wrong the way you were doing it in the past. Recharacterization and conversion are not the same thing.
Rick
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Is Box 2b for "Taxable amount not determined" checked? Or was it a total distribution?
Does the taxpayer have any basis in the IRA being converted? If so, have you determined how much of the distribution is cost basis with the balance being taxable?
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However, that step (C-1 through C-3) is now missing from the 2018 software. Take a look.
It appears that this ability to contribute to a Roth through the "Back-door" method previously allowed has disappeared with the new tax act.
The 1099-R in 2018 shows the distribution as a total distribution with the taxable status as undetermined.
I have tried every way to get the distribution to show up as non-taxable but I can't. I have tried every way suggested by those on this community
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Just about the only time when the distribution is nontaxable is if your client opened the one and only brand new traditional IRA and immediately convert that to Roth, assuming there is no gain or loss.
You may like to refer to §1.408A-4 Q-7, which refers to §408(d)(1) and (2) for the rules on income inclusion.
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I think the problem is that it is not uncommon for the tax treatment of backdoor Roth IRA, in terms of the rules on prorata income inclusion and IRA aggregation, to be misunderstood. When the 1099-R has the "Taxable amount not determined" box checked, it is easy to presume that the taxpayer can elect to convert only previously nondeductible contributions, when they really cannot.
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