What's the Form 8606 got to do with all this? I've heard you need to file that form for some retirement distributions but I'm not sure when it's required.

Form 8606 is crucial when dealing with nondeductible IRAs or Roth conversions. You'll need to file Form 8606 if your client made nondeductible contributions to traditional IRAs (to track basis), received distributions from traditional, SEP, or SIMPLE IRAs and has basis in any traditional IRA, or converted amounts from traditional/SEP/SIMPLE IRAs to a Roth IRA. If your client has made nondeductible contributions to traditional IRAs in the past, you'll need Form 8606 to determine the taxable portion of any distribution using the pro-rata rule. Without this form, the IRS might assume the entire distribution is taxable, even if part of it represents a return of already-taxed contributions.

Pub 590-B has separate worksheets depending on the type of distribution. For regular distributions, use Worksheet 1-1. For Roth distributions, use Worksheet 2-1 to determine if it's qualified. For figuring the taxable part of non-qualified Roth distributions, use Worksheet 2-2. The key is knowing which worksheet applies to your situation.

Thanks! I found the right worksheet. You're right that there are different ones depending on the type. I was using the wrong one initially which made everything confusing. I'm going to try working through the calculations again with Worksheet 1-1 since this is a traditional IRA distribution.

Thanks for mentioning this! I did get a T4A with the RESP payments in box 42 and included that when I first started my return. So my refund calculation already included that taxable income. I think what happened is exactly what the first commenter explained - the tuition credits reduced my tax payable, which affected my refund calculation. I'm going to look into transferring some of the credits to my parents since they're in a higher tax bracket anyway.

That's good that you already included the T4A! Then yes, what's happening is just the normal tax calculation with the tuition credits. If your parents are in a higher tax bracket, transferring the maximum allowable amount to them probably makes the most sense for your family overall. Just remember you can only transfer after using what you need to zero out your own federal tax, and the maximum transferable is $5,000 of the federal amount.

Would it be illegal to just not include the T2202A form? Since it makes the refund lower?

Wait this is confusing me. So if I was in the US for 120 days this year, 90 days last year, and 60 days the year before, how do I calculate this? Is it 120 + (90/3) + (60/6)?

Yes, you've got it right! For your example it would be: 120 + (90/3) + (60/6) = 120 + 30 + 10 = 160 days. Since that's less than 183, you wouldn't meet the substantial presence test based on those numbers. But remember, if you're in the US at least 31 days in the current year AND you hit or exceed 183 days with this calculation, then you meet the substantial presence test and would be considered a US resident for tax purposes unless you qualify for exceptions like the closer connection.

Did you use any particular tax software to file the 8840? I'm trying to figure out if I can just submit it on its own or if I need to file it with a tax return.

Is the amended return process complicated? I think I might have missed claiming this for 2022 and 2023 but I'm worried about messing something up and triggering an audit.

Filing an amended return is definitely more involved than a regular return, but it's not terribly complicated if you're only changing one thing like adding the Retirement Savings Contribution Credit. You'll need to file Form 1040-X along with a new Form 8880 for each year you're amending. The key is to be very clear about what you're changing and why. In the explanation section of the 1040-X, simply state that you're claiming the Retirement Savings Contribution Credit that you were eligible for but didn't claim on your original return. Include documentation of your IRA contributions for that year if you have it. The typical processing time for amended returns is 16-20 weeks, so be prepared to wait a while for your refund.

Yes, the Saver's Credit does phase out completely at certain income levels. For 2024, if you're married filing jointly, the credit phases out completely if your AGI is above $73,000. With your combined income of around $70k, you should still qualify for the 10% credit rate. For married filing jointly in 2024, the brackets are: - 50% credit if AGI is $43,500 or less - 20% credit if AGI is $43,501-$47,500 - 10% credit if AGI is $47,501-$73,000 - No credit if AGI is above $73,000 So at $70k income, you'd get a 10% credit on up to $4,000 in combined retirement contributions, meaning a maximum credit of $400. Definitely worth claiming!

I used the IP PIN option last year when I had this same issue. You can request one through the IRS website, but it takes about 2-3 weeks to arrive by mail. Once you have it though, it bypasses the AGI verification completely. Worked perfect for me!

Thanks for the info! Did you have to verify your identity to get the IP PIN? I tried making an IRS account before and couldn't get past their verification steps.

Just tried logging into last year's TurboTax account and they do actually show the "IRS Accepted AGI" which is different from what's on my PDF by about $200! Apparently there was an adjustment made. Going to try filing again with this number - fingers crossed!