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Entering a Basis in Roth or Traditional IRA

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Entering a Basis in Roth or Traditional IRA

Problem Description

Where do I enter a starting basis for Roth and Traditional IRAs?

Solution Description

Traditional IRAs:

  1. Go to Screen 24, Adjustments to Income.
  2. Locate the first section, Traditional IRA.
  3. In the subsection Form 8606 (Part I), enter the taxpayer and spouse (if applicable) basis in Traditional IRAs at the beginning of the current year in the field IRS basis for 20XX and earlier years.

Note: If nondeductible contributions are made in the current year, and distributions are also taken, the program prints this amount on line 1 of the IRS Pub. 590 worksheet.

Roth IRAs:

  1. Go to Screen 24, Adjustments to Income.
  2. Locate the section Roth IRA.
  3. In the subsection Form 8606 (Part III), enter the taxpayer and spouse (if applicable) basis in Roth IRAs at the beginning of the current year in Basis in Roth IRA Contributions as of 12/31/20XX.

Note: If the taxpayer receives a Roth IRA distribution in the current year, the basis amount entered prints on Form 8606, page 2, line 22.  If the taxpayer did not receive a Roth IRA distribution in current year, page 2 will not be generated. The program, however, will retain the basis and proforma it to next year, increasing it by any additional Roth IRA contributions made in the current year.. The program prints a Roth IRA Basis Schedule with the Worksheets.

Roth IRA Conversions:

  1. Go to Screen 24, Adjustments to Income.
  2. Locate the section Roth IRA.
  3. In the subsection Form 8606 (Part III), enter the taxpayer and spouse (if applicable) basis in Roth IRAs at the beginning of the current year in Basis in Roth IRA Conversions as of 12/31/20XX.

Note: If the taxpayer receives a Roth IRA distribution in the current year, the basis amount entered prints on Form 8606, page 2, line 24. If the taxpayer did not receive a Roth IRA distribution in the current year, page 2 will not be generated. The program, however, will retain the basis and proforma it to next year, increasing it by any additional Roth IRA conversions made in the current year. The program prints a Roth IRA Basis Schedule with the Worksheets.

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