Form 8606: Incorrect ratio calculated (line 10)

UncleBren

After following the guide for reporting a Backdoor Roth IRA, I opened a preview of the resulting form on your 2025 IRA Deduction Summary page. Comparing this to a competing tax software's output, I noticed a discrepancy on line 10 (divide line 5 by line 9). The values I entered would clearly yield a decimal less than one, but FreeTaxUSA just puts 1.00000 in the box, which results in an incorrect taxable amount.

Could your developers please investigate? Thanks.

Henry

Hi UncleBren, based on the IRS instructions for line 10, if line 5 is equal to or greater than line 9, the software should enter 1.000 on line 10. If you are getting a different result, I'd encourage you to double-check the values that are feeding into lines 5 and 9 in our software. Specifically:

1. Line 5 is your basis in traditional IRAs (nondeductible contributions not yet recovered).
2. Line 9 is the sum of lines 6, 7, and 8, which represents your total IRA value including outstanding balances and distributions.

It's worth reviewing each of those input screens to make sure the figures entered match your actual account statements and prior-year Form 8606 records. To revisit entries regarding prior-year basis and outstanding balances in your traditional IRA, go to Income > Common Income > Retirement Income (1099-R) and click on Continue. To revisit entries regarding current year traditional IRA contributions, go to Deductions/Credits > Common Deductions/Credits > IRA Contributions.

If after reviewing your entries you still believe the values going into lines 5 and 9 are correct and the ratio should be less than 1, please contact Customer Support while signed into your account so a support representative can take a look at your Form 8606 and see what's causing the discrepancy.

UncleBren

Perhaps I should've worded it differently. Given my usual IRA conversion patterns, Form 8606 line 5 is intentionally less than line 9 (And looking over a past Form 8606 prepared by a CPA, this is typical for me.) That's why line 10's ratio should be less than one. In other words, the directions next to line 10 "If the result is 1.000 or more, enter 1.000" don't really apply here.

Good call on double-checking the upstream inputs to these forms, though. I clicked through the 1099-R and IRA Contributions web forms, and even though I didn't change anything, the tax return preview seems to have changed. Lines 6 and 8-11 are now blank compared to before. Maybe some entries got zeroed out, so I will dig into this some more and follow up with support if necessary.

Thanks!

UncleBren

Update: FreeTaxUSA Support clarified that the blank lines 6 and 8-11 were correct because certain conditions allow (or even require) the use of a separate Worksheet 1-1, which does a similar calculation. They stamp a little footnote on Form 8606 to indicate that the values on lines 13 and 18 come from the completed worksheet.

Am grateful for the excellent support here!

GregW

FYI, the worksheet is sometimes required when deductible contributions and distributions are made in the same year and your IRA has basis. The portion of the distribution that is taxable depends in part on the amount of deductible contributions made that year. But if your income is in the range where the amount of your deduction is reduced, the deductible amount depends on your AGI. But your AGI depends on how much of the distributions are taxable. This is, of course, a circular reference. The worksheet provides a way to bypass the circularity.

MatthewD

Hi UncleBren,

Thank you for the follow up and letting us know Customer Support helped you out. We have an excellent team in Support! GregW is correct. When your IRA has basis (nondeductible contributions), then Worksheet 1-1 is required so the taxable portion can be calculated.

Thanks GregW!

macr1ion

I have been using Fee Tax several years and they do my 8606. Hope it's right cause I don't want to fool with it.😎

MatthewD

Hello Macr1ion,

Keep in mind that FreeTaxUSA has a calculation guarantee. If you have any concerns with the calculation on your 8606, please contact Customer Support.