@krwetw wrote:
Thanks for replying. With changes in the SECURE Act of 2019, a non-spousal inheritor of a Roth IRA has 10 years to disperse all funds in the IRA if the person died in 2020 or later. In this case, the original owner of the IRA was not old enough for required minimum distributions to apply to them as yet. The 59.5 rule doesn't apply to a beneficiary in this case (https://www.irs.gov/taxtopics/tc557). But, specifically, what I'm trying to get at is why Turbo Tax is considering the dispersement from the inherited Roth IRA as taxable income.
There is no early distribution penalty for an inherited IRA. However, the box 1 amount is fully taxable as ordinary income for an inherited Traditional IRA as your 1099-R indicated it is. This is NOT a Roth IRA as you said the "IRA/SEP/SIMPLE" box is checked, and a code 4 is NOT for an inherited Roth. It should increase your AGI but the box 1 amount and will increase your tax (and reduce any refund).
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
