Help on Form 8606

[tammie]

I am trying to do a form 8606 for the very first time--I have watched videos, read discussions and instructions and I'm not getting it.  I am about to tell the client to take it somewhere else unless someone with be willing to walk me through this.  I know this is a big ask at this time of year.  Things are just not working here.  I entered the 1099R data on the worksheet.  I go down to page 2 and mark B6 (client had a 10K distribution and only $5k is a conversion to Roth).  I go to form 8606; box 1 populated; zero in box 2; Then it looks like I need to start completing lines 6-12.  I click on any of those lines and there is a link which takes me to the 1099R worksheet Box 1.  I think that the data should populate on 8606 but it is not.   I don't know what I am supposed to get from box 1 on 1099R--that's where I started.  I am completely frustrated.  Could any one help?

[rbynaker]

I'm not sure how much help I'm going to be but I may be able to give you some breadcrumbs.  ProSeries is very good at IRAs and the 8606 (in comparison, Drake software is TERRIBLE and the software is a glorified typewriter when it comes to the 8606!)

In addition to the Form 8606 (one for -T taxpayer and one for -S spouse), there are also IRA Information Worksheets that you may need to enter data into and IRA Contribution Worksheets that you may need to enter data into.  Wander around those (quite long) forms line by line to see what you need to enter (maybe prior year basis, 12/31 FMV, etc.)

I'm normally in favor of referring out work that you can't figure out but this one should be doable and you may learn a lot along the way.

Rick

[tammie]

Thank you for the encouragement.  I will wander around the worksheets and see what I find.

[qbteachmt]

It helps to know what you expect to see. Here are what seems to be the scenario for your taxpayer.

They got part of the money, so there should be an amount withheld. That means there is a Gross Distribution, some of which is Roth Conversion and some is forwarded against taxes. Or, they got it all and did the rollover portion themselves, so the withholding will be higher, in this example. This assumes you have a qualified rollover or transfer for the conversion.

The distribution, even with a conversion, is fully taxable, unless there is some Basis in the Traditional IRA (paid in post-tax and not deducted in the year contributed). If so, then there would be pro-rated taxable. If they never made that sort of contribution, then Basis is 0 and anything that happens (even in combination) will be taxable Gross.

If the person is under 59 1/2, the math of Gross minus the $5k is early distribution subject to penalty in addition to the tax, unless some exception applies.

So, yes, the worksheet is going to need to you to scroll through it, confirm values are entered and boxes are checkmarked, to trigger all the events (and work through them in this order):

Gross distribution taxable

Withholding

Conversion

Early Distribution penalty on portion kept + withheld

Pro-rated taxable in the case of basis

If you dealt with each event, it should work for you.

[qbteachmt]

I forgot the link to the help article:

https://proconnect.intuit.com/community/individual/help/proseries-form-1099-r-faq-s/00/4853

[tammie]

Many thanks for the information on the 8606--I am taking a breaking from that account to get some others done today, with all of your help, I am going to tackle it tomorrow when I an give it complete focus.