CARES Act - not all of RMD received
kamull01
Level 2

CARES Act - not all of RMD received

My RMD comes to me in a monthly distribution (i.e., the year's RMD divided by 12) .  I received Jan, Feb, and Mar checks, but then I was given the option of waiving the RMD.  I decided to stop the payments.  Note: What I had received up to that point was not very much and it didn't seem worth all the trouble to do a roll-over to put those 3 months of RMD distributions back into the account.   I have received a 1099-R for the 3 months' worth of the RMD. 

On the Turbo Tax Deluxe screen that says "Tell us More About This Retirement Plan Distribution", it asks whether I received all of the RMD or not.  How should I answer?  If I answer "NO", then a screen comes up with the heading "Required Minimum Distribution" and it asks me to fill in the blanks for the RMD amount and the Amount Actually Received.  Then the next screen has the heading "Let's see if we can reduce your tax bill"  There it says that I owe 50% of the remaining RMD that I did not take unless I explain why there is a difference between the amount of the RMD and what I actually received.  Of course, the reason is that I stopped the monthly distributions under the provision of the CARES Act.

Or do I answer that I received all of the RMD?  Technically, what I received is not ALL of the RMD, but is ALL that I received before the CARES Act went into effect.    If I answer "YES" that I received ALL of the RMD, then TT is satisfied and moves on to the next Income item.

Likewise, if I answer "I was not required to take an RMD", TT is satisfied and moves on the the next Income item.

So, how do I answer the question about whether I took all of the RMD or not on the screen with the heading "Tell us More About This Retirement Plan Distribution"? 

a. Yes, all of it  or

b. No, not all of it or

c.  I was not required to take an RMD for 2020.

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dmertz
Level 15

Retirement tax questions

Since the CARES Act waived RMDs for 2020, none of the distributions you received were RMDs even though that was the original intent of the distributions.  The correct answer to TurboTax's questions is that none of the amount distributed was RMD and that you had distributed to you all (of the $0) that was required to be distributed.

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PaulB1
Level 2

Retirement tax questions

for clarity of the previous very good explanation; the correct option appear to be the third bullet: " xxxx was not required to take an RMD for 2020"

Turbo Tax should have said something about that option being appropriate given the CARES ACT!😖

 

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kamull01
Level 2

Retirement tax questions

It is impossible to answer, on the one hand, that none of it was an RMD and to answer, on the other hand, that $0 of the RMD was distributed.  By answering that none of it was an RMD (even though the amount is there on the 1099-R, a form about RMDs), that finishes the question; in other words, it's not possible to answer further that $0 of it was required.

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DawnC
Employee Tax Expert

Retirement tax questions

You need to delete that 1099-R and re-enter it so you can get it reported properly.   You won't be able to edit it to correct it.   Since RMDs were waived for 2020, no part of the distribution was actually an RMD even though it was taken with the intention of satisfying an RMD.  In TurboTax, indicate that the distribution was not an RMD.  Indicate that you moved the money to another retirement account (or returned it to the same account), then indicate how much of the distribution you returned to the IRA.  TurboTax will include the entire gross amount on Form 1040 line 4a but exclude the amount rolled over from the amount on line 4b.  TurboTax will also include the word ROLLOVER next to the line.

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dmertz
Level 15

Retirement tax questions

Saying that you took $0 because zero $0 was the amount required has exactly the same meaning as saying that you didn't take anything because no distribution was required.  $0 = nothing.

 

Form 1099-R is a form that reports distributions.  It says nothing about whether or not a distribution is an RMD.

 

TurboTax asks two entirely independent questions about RMDs.  One is to determine how much is eligible for rollover and is asked for each Form 1099-R entered.  The other asks about RMDs in aggregate to determine if Form 5239 Part IX is needed to report that you did not satisfy all required distributions.  In response to this question if you say that you received all of your RMD, no Form 5329 Part IX is generated.  If you say that you were not required to take an RMD, no Form 5329 is generated.  Since no distributions were required to be made in 2020 (other than periodic distributions from pensions which most people don't even realize are required distributions), either of these choices produces the desired result.

 

Unfortunately, in some areas of TurboTax uses the term "RMD" (Required Minimum Distribution) to refer to distributions that ended up not actually being required.  This perpetuates the misconception that people have that the distribution is still an "RMD" even though the distribution was, in the end, not required.

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PaulB1
Level 2

Retirement tax questions

Thanks Dawn.

One point of clarification and that is I did not have to delete and re-enter info as suggested. I went to VIEW FORMS and edited the 1099-R   line for "RMD".

In my case, the line now just says "$0" for RMD amount.

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VLRichens
New Member

Retirement tax questions

Thank you!

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