Why does TurboTax ask for RMD for a pension?

[BillK]

I received a 1099-R for a state pension distribution.  After putting this form into TurboTax, it asked whether any of this distribution was for an RMD.  Because I am older than 70.5 years, TT says I have to take an RMD for this account.  I have no idea what the RMD is for this account.  Because it is a pension, rather than an IRA, I don't think I have a previous year balance on which to compute a RMD value.  I just get a monthly payment for life.  What do I do?

[NCperson]

please check that your inputs into Turbo Tax match EXACTLY to the form you have...esp. box 7 and the check box associated with that box, 

somehow TT is thinking this is an IRA and not a pension ....box 7 controls that, 

[IsabellaG · Accepted solution]

All retirement accounts, which include IRAs and pensions, have to follow RMD rules once you reach 70.5 years of age. 

To answer the question in TurboTax, you don't have to figure out your RMD. As long as you are receiving periodic payments, you can check yes, because the administrator of your plan has already calculated this. You would also say that all of the distribution is RMD.

[BillK]

Thank you for your assistance.  I had filled in the form exactly as the paper copy showed, so that wasn't the problem.  So, I said that this distribution covered all of my RMD, as you suggested, and I'm going to have faith that the IRS accepts that.  What I don't understand is why TT doesn't explain the situation as you did.  It seems as though they should ask about the periodic payments before asking about the RMD so that they know it is a pension instead of asking for information we don't have.

[NCperson]

just out of curiosity, what letter / number is in Box 7 and is the check box next to it check or not (IRA / SEP)?  I wonder if the issuer didn't fill out the form correctly?

I've entered plenty of these 1099 forms for  my pension and i don't recall that RMD question coming up. (and I just tested it again - same result - the question is not asked).  

My pension is coded as '7- normal' and I am not asked the RMD question.  If I look at the 1099-R in 'forms' view, that question is left unanswered yet there is no error on my TT return.  

[BillK]

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@NCperson wrote:

just out of curiosity, what letter / number is in Box 7 and is the check box next to it check or not (IRA / SEP)?  I wonder if the issuer didn't fill out the form correctly?

I've entered plenty of these 1099 forms for  my pension and i don't recall that RMD question coming up. (and I just tested it again - same result - the question is not asked).  

My pension is coded as '7- normal' and I am not asked the RMD question.  If I look at the 1099-R in 'forms' view, that question is left unanswered yet there is no error on my TT return.  

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Box 7 has the code of "7-normal" and the IRA/SEP box is NOT checked.  I would assume that identifies this is a pension.  Last year, I didn't have any questions about an RMD for this account, so I was surprised to see them this year.  However, there is an intervening question that I don't recall from last year.  It comes after comes up after I confirm the IRA/SEP box is not checked and I state that this plan didn't come from being a public safety officer.  That question asks "Where is this distribution from?".  The answers are "Federal govt pension", "AZ state or local govt pension" (which is what I selected), a couple other AZ entities, other forms of public employment, or "None of the above".  Maybe my recollection is poor, but I don't remember having to identify this as an Arizona state pension last year.  So, perhaps there is a bug in the program related to being an AZ pension that non-Arizona users don't encounter.  Anyhow, how can I alert TT about this issue?  They really shouldn't be freaking out their customers by asking about RMD information when it is unknown and doesn't apply.

[NCperson]

I think you are on to something..

that screen you reference with the AZ question is where TT asks questions that effect state returns (my questions on that screen are specific to the state I live in).   TT is determining that the pension is from AZ and since you already stated you are a AZ resident, TT knows to deduct $2500 that is available for AZ residents for AZ pension payments. 

My next screen asks whether the distribution is from a qualified plan.  The question of RMD does not appear. (my box 7 is 'normal')

However, if Box 7 is '4-death' (which for another family member under a separate return who is the surviving spouse of a pensioner), that RMD question indeed appears after the state specific screen. 

anyway, reporting bugs:

https://ttlc.intuit.com/questions/4512589-how-to-i-report-bugs 

[IsabellaG]

The RMD question comes up for any pension when you reach the age 70.5. It also comes up in death distributions, because an RMD is required.

[NCperson]

that is consistent with my experience; family members under 70.5 (box 7 - normal) do not see the question, but those over 70.5 do (box 7 : 4-- death)

[BillK · Accepted solution]

After hours of research at IRS.gov and my pension's website, I now understand that TT has a fundamental flaw in processing this 1099-R.  It turns out that my type of pension is a defined benefit plan, which is excluded from RMD withdrawals.  Such a plan doesn't even have an end of year balance on which to compute an RMD.  So, TT should never have asked whether the reported distributions were RMD withdrawals.  In the preface to this question (titled "About This Retirement Account"), TT states that I "needed to take a required minimum amount of money … out of this account."  That is a false claim and the reason why I became confused about this question.  The technically correct answer is "No, none of this withdrawal was an RMD.", but I never would have guessed that from the incorrect information given in the preface.  I will report this bug to TT through the link provided by NCperson.

[macuser_22]

That is not correct.

Virtually all pension plans, defined benefit plans, and annuities in existence today fall under section 401 of the tax code.

Required minimum distributions for defined benefit plans and annuity contracts all require RMD's after age 70 1/2.  If you receive periodic (monthly) payments from any pension plan you can be assured that the custodian of the plan is meeting the requirements so you can safely answer "yes" to the question.

The rules that the plan administrator must use to calculate the RMD as required by §401(a)(9) are defined in § 1.401(a)(9)-6) of the Internal Revenue Code (IRC).

The answer to the question does not go on your tax return, it is simply to make sure you do not owe any penalty for not taking the RMD or use it for an ineligible rollover.

The question is just to be sure that the requirement was met.

https://ttlc.intuit.com/replies/3302117

[garyandjoanie]

It works right.  Check the box that says this is not an RMD.  then follow the prompts.  It works.

[MarilynG1]

You can answer YES to the RMD question when entering the 1099-R for your Pension.  The Pension Administrators will be sure to send you the correct amount if you are over 70.5.

The answer does not go on your tax return.

Click the link for more info on RMD for Pensions.

[MKS01]

The RMD question does not appear if it is a non-qualifying account. Also, if you indicate that none of the payment was an RMD, you will eventually get a screen that allows you to indicate that you didn't need to take an RMD.

[KarenM90]

TurboTax includes this question, as the RMD rules apply to various types of accounts.  Please note this list from the IRS publication (link included below)

Do these rules apply to my retirement plan?

These minimum distribution rules apply to:

• traditional IRAs
• SEP IRAs
• SIMPLE IRAs
• 401(k) plans
• 403(b) plans
• 457(b) plans
• profit-sharing plans
• other defined contribution plans

As MKS01 indicated above, the on-screen prompts in TurboTax will give you the option for indicating that you did not need to take an RMD.  

Link to IRS RMD Info:  IRS.gov RMDs