IRA distribution offset

[Chris_4325]

The taxpayer withdrew $5000 from IRA in 2023. He does not have any earned income in 2023 and it is past 60 days for rollover to another IRA. I entered $5000 into 2023 contribution (in Pro Series) and although it is not deductible, it made prior distribution nontaxable. Line 4b was $5000 and now is $0. Is that correct? 

[Just-Lisa-Now-]

Look at the 8606, did he have a prior year non-deductible IRA thats wiping it out?

Wait, I just re-read what you wrote, why did you enter it as a contribution?  the software doesnt know its been more than 60 day, but you do, so it cant be a rollover and hes not allowed to make a contribution if hes got no earned income.

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@Chris_4325 wrote:

The taxpayer withdrew $5000 from IRA in 2023. He does not have any earned income in 2023 and it is past 60 days for rollover to another IRA. I entered $5000 into 2023 contribution (in Pro Series) and although it is not deductible, it made prior distribution nontaxable. Line 4b was $5000 and now is $0. Is that correct? 

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[Chris_4325]

I entered IRA contribution as a new contribution in the new contribution worksheet.  For rollovers within 60 days there is a section on 1099-R distribution worksheet. This contribution didn't carry over to the rollover section. Although there is no earned income, I thought there was something else that created this offset.

[Just-Lisa-Now- · Accepted solution]

I guess Im misreading what you wrote, you said it was passed the 60 day to roll it over, so thats a taxable transaction, he cant put it back in another IRA as a contribution to avoid the taxability.

[Accountant-Man]

He has no earned income, so you cannot contribute it to another IRA, even as non-deductible. Remove it, or you will have a penalty.

BTW, contributing and distributing in the sale year is not handled correctly by Pro Series, which is why it appears to be reducing the taxability of the distribution.

Since he cannot contribute for 2023, erasing the "contribution" will re-tax the distribution.