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How do I prevent a taxable IRA distribution from flowing to the 8606?

Level 1

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?

Labels (1)
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9 Replies 9
Level 7

Probably to check to see if there is a basis in the IRA

Level 1

There is and it's there.

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Level 10

I think you need to review your entries on Form 1099-R    

Level 1

I have 5 times over. Could it have anything to do with the covid mess?

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Level 15

If there's basis in the IRAs you don't have a choice.


ex-AllStar
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Level 15

Make sure you enter the 12/31/20 value of all IRAs on the 8606, too. That will get rid of the 100% nontaxable part.


ex-AllStar
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Level 1

That dropped the % to.86988 BUT none of it is non-deductible contributions??

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Level 1

Why? It's never done this before. Is it covid related?

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Level 15

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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