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Properly reporting on Fm 8606, 2020 recharacterizing year 2019 and 2020 Trad. to Roth IRA's

lovetaxes
Level 3

Client received Forms 1099-R, converting 2019 and 2020 non-deductible IRAs to Roth IRAs. My problem is to get the Lacerte software to properly report this event on Form 8606. I believe I need to get the $7,000 for each year, both converted in 2020, to populate Line 8 and also Line 16 and 17.

The client doesn't have any previous Roth IRA's or any remaining Traditional IRAs.

Any assistance will certainly help me sleep better tonight. Many thanks in advance. I've come to depend on the Community for answers. Unfortunately, Lacerte's reps that answer the telephone do not have answers and can take up to 1-2 hours attempting to find someone within Lacerte to respond. Very nice people but not as technically savvy as in past years.

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6 Replies 6
qbteachmt
Level 15

Start with the Help article:

https://proconnect.intuit.com/community/individual/help/individual-form-1099-r-frequently-asked-ques...

But you used conflicting terminology. Telling us something was Recharacterized is not the same activity as telling us these are Conversions.

I suggest reading the IRS guidance on IRAs.

*******************************
"Level Up" is a gaming function, not a real life function.
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PKCPAMST
Level 4

Here are the steps:

  1. On Screen 13.1 – Pensions, IRAs (1099-R), in Section Form 1099-R enter the Gross Distribution amount for the 2019 IRA distribution, making sure the IRA/SEP/SIMPLE box is checked. Leave the Taxable Amount blank.
  2. On Screen 13.1 – Pensions, IRAs (1099-R), in Section Form 8606, in the only field below Conversions to Roth IRA, enter the amount being converted to Roth IRA.
  3. On Screen 13.1 – Pensions, IRAs (1099-R), in Section Additional Electronic Filing Information, enter -1.
  4. Repeat Steps 1 through 3 for the 2020 IRA distribution.
  5. Go to Screen 24, Adjustments to income, in Section Traditional IRA, under Form 8606 (Part I) enter $7,000 twice – once in IRA basis for 2019, and then in 2020 nondeductible contribution.

Now, when you go the Forms tab, Form 8606 Parts I and II should be populated. If there is an amount on Line 18, it will flow through to Form 1040-SR, Line 4b.

 

Please let me know if this helps.

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lovetaxes
Level 3

Good morning PKCPAMST,

I may be okay as is AND I know that I'm closer than I've been able to attain prior to your assistance, for which I am extremely grateful for.

On my copy of Form 8606 after following your step by step advice, I thought that Line 8, 16, and 17, would read $14,000. $7,000 for 2019 conversion and $7,000 for 2020 conversion that also took place in 2020. However, box 8 only reads $7,000.

Is this correct or did I leave something out or possibly not frame my question correctly? I know I'm either there or very close. This may be my last year in business (I'm 80) and I don't want to leave an issue unresolved for whomever handles this client next year.

Awaiting your generous advice,

lovetaxes

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PKCPAMST
Level 4

lovetaxes,

I appreciate your dedication  and commitment to the tax profession!

 Line 8 should indeed read $14,000. The same is true for Lines 16 and 17, assuming there was no increase in 2019 and 2020 values.

 Please make sure in Screen 13.1, the IRA box is checked for both IRAs.

PKCPAMST

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lovetaxes
Level 3

Well, I appreciate your knowledge and your generosity to share it with others, like me! 

I do enjoy my work and also I like to eat, so working is both a pleasure and a bit of a necessity if I want to maintain a better lifestyle.

My 8606 issue is no longer an issue, thanks to you. The Community staff has provided the parachute I require from time to time. Lacerte's tech support has not performed well in the past year or more. Had I known this was to be the future of this critical service, I'd have used the Community sooner.

Over the years I pleaded with Lacerte to bring their fees down for the "individual preparers". But they insist on charging the individual the bulk of the fee, reducing the 2nd through however many preparers in a firm almost nothing. I've used them since 1991-1992 and I'd love to continue by maintaining less clients, but the cost becomes prohibitive and nobody's listening.

I hope I have the opportunity to use your time again before I call it quits. You've really made my day.

Sincerely,

Bob (lovetaxes)

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PKCPAMST
Level 4

Bob,

Thanks for your kind words.

If I can help you in the future, I would be happy to. Knowledge is meant to be shared. 

PK

 

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