2018 Form 1040 Line 4 Example

Submitted by Amar Patel on Fri, 2019-02-22 21:17

I always get confused when a line requires entries from multiple things. Here is an example:

1.) 2 taxpayers are filing as Married Filing Jointly
2.) Taxpayer 1 takes a RMD from his traditional IRA, say = $1000
3.) Taxpayer 2 takes a RMD from her traditional IRA, say = $5000
4.) Taxpayer 2 additionally converts $30000 from her traditional IRA to her Roth IRA (only part 2 of Form 8606 applies, with no basis from prior years)
5.) Taxpayer 1 also got $15000 from his pension
6.) Taxpayer 2 also got $18000 from her pension

So…

– Line 4a = 30000 (from item 4 above)
– Line 4b = items 2 through 6 above = 1000 + 5000 + 30000 + 15000 + 18000 = 69000

Right, as if each “transaction” gets added to Form 1040 one at a time, per the rules of each “transaction”? Or does Line 4a = 36000 (inclusive of items 2 to 4)? The instructions for Line 4 does include the following language: “Exception 2. If any of the following apply, enter the total distribution on line 4a and see Form 8606 and its instructions to figure the amount to enter on line 4b.”



Submitted by Alan - IRA critic on Fri, 2019-02-22 22:13

  • These arcane rules may just be the best incentive to stop filing paper returns and let tax software deal with 4a, which only exists for the benefit of IRS 1099 matching purposes. I just filed using free file fillable forms, an IRS program, and I entered a fully taxable pension on 4a and the IRS accepted the return, contrary to the 1040 Inst for line 4a for taxable pensions. I also had a partially taxable IRA distribution entered on 4a per instructions. Therefore, my inclination now that line 15 and 16 and been combined on line 4 is to show gross figures in 4a UNLESS every 1099R results in a fully taxable distribution. In other words, just one 1099R that is NOT fully taxable, then show everything on 4a. 
  • Note that the 1040 Inst have a paragraph under the IRA instructions (formerly line 15) titled “More than one distribution” which states that if there is more than one place the total distribution on 4a. I think the IRS probably intended to integrate the IRA with the pension instructions, so if there is more than one distribution, whatever they are, just enter the total on 4a. Of course, you must calculate the correct 4b taxable amount. Extended to your example, that would equate to all 69000 going on 4a.
  • That said, different tax programs may be programmed differently, but if you are using one of the off the shelf programs, let the program determine what goes on 4a.

 

Submitted by Amar Patel on Sat, 2019-02-23 00:55

Thanks for the response! I’m not sure I’m fully following, though. I mean, if all the “transactions” are fully taxable as they are in this example, one of Alan’s responses suggest that Line 4a should be blank. But then Alan states to use the full gross amount on Line 4a a moment later. Is that because one of the “transactions” requires reporting on Form 8606 (for the conversion of a portion of a traditional IRA to Roth IRA), and thus not all of the “transactions” are “simple distributions”?

Submitted by Alan - IRA critic on Sat, 2019-02-23 02:26

No, I indicated that the IRS recommends leaving 4a blank for fully taxable pensions, but I think it should be filled unless ALL distributions are NOT to be entered on 4a. Your situation includes a conversion that must be entered on 4a, so you should probably enter all distributions on 4a.

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