How do I prevent a taxable IRA distribution from flowing to the 8606?
Taxes were taken out and we want to pay it this year..why is it reverting to the 8606 at 100% non taxable....would they then have to pay it over the next few years? Don't want to. Is there an override to it flowing to the 8606?
This shows you have a misunderstanding of Distributions: "BUT none of it is non-deductible contributions?"
You are not able to pick and choose which money this is. It's just Money, out of a big pool. And that pool consists of all funds in all similar accounts of a type per the IRA.
For example, let's pretend you have one Trad IRA that is a few years old and has only deducted contributions + the earnings. The other Trad IRA is the one with some basis + earnings.
In other words, taking money from one Traditional IRA, when you have that mix, the distribution is treated as taking from "my IRA accounts" in Total. That's why the 8606 comes into play. This is the reconciliation to figure out how much of that distribution is taxable, as pro rata of your Whole Total Funds, and taking the Basis into account, it seems you have a partially taxable distribution.
"It's never done this before. Is it covid related?"
That's always how the distributions work, when someone has Mixed funds in one or more account.
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