Recording IRA distributions on Federal 1040
In 2023, at age 62, I cashed in 2 IRAs (total distribution). Both 1099-Rs have code 7 in box 7 and both have an amount listed in box 4 (I had 10% held each time). On my federal 1040 line 4a, I recorded the amounts from the 1099-Rs (line 1) and also carried that same amount to 1040 line 4b.
Instead, are the amounts on the 1099-Rs box 4 used to calculate the amount (a lesser amount) to record on the 1040 line 4b (using Form 8606???)?
Further info...
- Both distributions were complete liquidations (1099-R total distribution box in 2b is checked)
- On both 1099-Rs, the amount in box 2a is the same as in box 1
- I had 10% federal income tax withheld both times (1099-R box 4)
So to further state my question....
As an example, let's say 1099-R box 1 and 2a are both $25,000 and box 4 is $2500. Is my taxable amount (1040 line 4b, figured using Form 8606?) not $22,500? Did I not already pay some tax on the distribution as it was withdrawn (the 10% that was withheld)? Did that financial institution not send that 10% to the government as part of my tax burden on that distribution?
Best Answer
-
The full $25,000 is taxable income to you. You withdrew that much from your IRA and it's fully taxable. Of that amount, you used $2,500 to pre-pay any potential tax liability on that tax.
It's no different from your wages. If you earn $25,000, but $1,000 is withheld for Federal income taxes, you still include the full $25,000 in your income when you calculate your tax liability.
