1040 Form 8606 Worksheet 1-5 from IRS Publication 590 in Lacerte

How to generate the publication 590 Worksheet 1-5 in Lacerte when a taxpayer has a Traditional IRA distribution that has been rolled over to a Roth IRA and a Traditional IRA contribution?

Solution

Per the Publication 590 if a taxpayer has both a distribution and a contribution they will need to complete Worksheet 1-5 to figure the taxable portion of the distribution. To generate Worksheet 1-5 in Lacerte:

1.  Go to Screen 13.1 Pensions, IRAs.
2. Enter the Distribution code(s) (input codes 196 and 810) from the 1099-R.
3. Check the box IRA/SEP/SIMPLE (input code 2).
4. Enter the Gross Distribution (input code 3).
5. Scroll down to the Form 8606 section.
6. Enter the Value of IRA in Value of all traditional/SEP/SIMPLE IRAs at 12/31/20YY (plus outstanding rollovers) (-1=none) (input code 34).
7. Under Conversion to Roth IRA enter the portion of the distribution that was converted to a Roth IRA in Traditional/SEP/SIMPLE IRA distributions converted to Roth IRA (input code 138).
8. Go to Screen 24 Adjustments to Income.
9. Enter the amount of IRA contribution in IRA contributions (1=maximum deduction) (input code 1).
10. Enter the amount of basis in both input fields IRA basis for 20YY and earlier year (input code 6) and Basis in IRA as of 12/31/20YY (input code 21).  Both inputs are necessary for worksheet.
11. Make sure there is another source of income with a qualified retirement plan, for example if the taxpayer has a W-2, the Retirement plan box must be checked on screen 10.