Discussion:Error in Proseries Form 8606 worksheet Roth conversion

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Discussion Forum Index --> Business Growth Community --> Error in Proseries Form 8606 worksheet Roth conversion


Riki EA (talk|edits) said:

16 February 2011
Hello, all.

I wanted to give Proseries users a heads up to double check calculations on the Taxable IRA Distribution Worksheet linked to Form 8606 for Roth conversions from nondeductible traditional IRAs.

We have a client who converted most of a nondeductible traditional IRA to a Roth IRA in 2010 while continuing to fund the traditional IRA. His contributions for 2010 included a contribution in January 2011. We knew from doing a rough tax projection that a small portion of the Roth conversion would be taxable. (He does not have any other IRAs, and only a small portion of the nondeductible IRA balance was earnings; the rest was basis.) We were puzzled when Proseries showed no taxable portion, but also no errors. Tracing the numbers, we discovered that Line 1 of the Taxable IRA Distribution Worksheet incorrectly included the January 2011 portion of the 2010 traditional IRA contributions in the calculation, even though Form 8606 correctly subtracted off the January 2011 on line 4. Because the taxable portion is determined on the worksheet, instead of on Form 8606 itself, the calculation was wrong. Overriding Line 1 of the Taxable IRA Worksheet with the correct value (2010 contributions contributed in 2010) fixed the problem, and the the right numbers flowed to Form 8606.

My colleague was on the phone with Intuit for 45 minutes yesterday, and let them know of the problem, but it is unclear when it will be corrected. As of today 2/16/11, the error hadn't been fixed. We might not have noticed had we not done the calculation by hand.

Tax preparer, beware.

-Riki_EA

Kevinh5 (talk|edits) said:

16 February 2011
As I have said (and written) many many times: Tax software is no substitute for a good tax professional. Congratulations on being better than the software, Riki_EA!

Nightsnorkeler (talk|edits) said:

16 February 2011
FYI, we just had the exact same situation with UltraTax yesterday. I have not had time yet to verify the calculations as correct or incorrect, however I find it interesting that two different software companies would program their software incorrectly in exactly the same manner.

I'll try to post an update after I review the return for accuracy.

Death&Taxes (talk|edits) said:

16 February 2011
Thanks for the heads up. I wonder if an amount is entered in Box 12 of the IRA Contribution Worksheet. It says this line is only necessary if there were traditional distributions in 2010, and I would assume a Roth conversion is a traditional distribution. You know, you could get lost in the number of worksheets that need to be populated in these circumstances.

Riki EA (talk|edits) said:

16 February 2011
I spent about an hour checking and rechecking, because usually these errors are because I haven't checked some key box or entered something somewhere. In this case, I had already put in the amount contributed during 2011 for 2010 on Line 12 of the IRA Contributions Worksheet ("Enter any contributions included on line 10 that were made during 1/1/2011 to 4/18/2011") This amount flows correctly to Line 4 of Form 8606. However, the software then hands over the calculation to the "Taxable IRA Distribution Worksheet". Here, in Box 1, it brings over line 1 (Enter traditional IRA contributions made for 2010, including any made between 1/1/2011 and 4/18/2011...) from the IRA Contributions Worksheet without subtracting off Box 12. This seems to be where there's an error in the software.

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