IRA Distribution with a basis

[CLASSY]

I have submitted a tax return  twice and it has been rejected both times. error-FED_Taxable _inherite. Says a potential issue with calculation. This distribution is not an inherited IRA. However it does have a basis of which I have completed 8606. I have went over it many times to see if I had checked an inherited box. I can't find anything. Any suggestions or help would be greatly appreciated. I have done this client's tax for many years with the basis and never had an issue. Thanks.

[dkh · Accepted solution]

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/return-rejected-due-to-...

[Frustrated-in-IL]

There is a problem with calculation of the taxable portion of an IRA when there is also an inherited IRA.  Specifically, the program is including the amount of the inherited IRA distribution on line 7 of Form 8606.  This is causing a larger than allowed basis recovery.  Apparently, ProSeries is holding returns that include Form 8606 until this is fixed.  All my returns with Form 8606 got this rejection and I had no idea until I actually worked on one with an inherited IRA.  It looked funny to me and I compared it with last year and immediately saw the problem.

[CLASSY]

Thanks. I saw this after I posted question.

[CLASSY]

Thank you.

[CLASSY]

I understand what you are saying but, my client's IRA is NOT inherited. Are they just assuming all IRA'S with a basis is inherited?

[Frustrated-in-IL]

Apparently, they were holding returns which included Form 8606 regardless whether the IRA was inherited or not.  My rejections were both returns which did NOT have an inherited IRA so the explanation for the rejection made no sense.  Instead of wasting time on the phone with customer service, which would have been pointless anyway, I figured I would wait to see if it was fixed by March 5th.  It was after that when I discovered the real problem on the Form 8606, which did in fact have to do with an inherited IRA.

After the program updated, nothing changed on the two previously rejected returns and I retransmitted them without issue.  As for the return with the inherited IRA, the Form 8606 appears to be calculating properly now.  I have yet to transmit that return.