1099-R Total - Rounding Error?

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TurboTax appears to be rounding 1099-R IRA distributions and then adding to obtain a total for form 1040. Is this right?? I would have thought the other way around.

rjs

Level 15

All tax software does that. The IRS understands it, and they ignore small discrepancies. It's not a "huge flag" or even a small flag. TurboTax hasn't fixed it because it's not a problem. Don't worry about it.

SentinelAuthor

Level 4

Can anyone share where rounding BEFORE adding figures is stated as being 'OK' in IRS guidance?

The Pension/401K and IRA distribution lines on 1040 are of particular concern given the fact if someone 'appears' to have reported low for RMD's (even by $1) it might trigger a look for a 50% penalty.

rjs

Level 15

@Sentinel wrote:

Can anyone share where rounding BEFORE adding figures is stated as being 'OK' in IRS guidance?

It's not stated anywhere (that I know of). But millions of tax returns are filed that way every year, using many different tax software programs, including professional software, and it never causes a problem. (It's possible that the approval for rounding is stated in a technical document that the IRS gives to software vendors, that the public never sees.)

@Sentinel wrote:

if someone 'appears' to have reported low for RMD's (even by $1) it could trigger a look for a 50% penalty.

The penalty is 50% of the amount that was not taken. The IRS is not going to go after anyone for 50 cents on a $1 shortfall.

I don't know that the IRS uses the tax return to determine whether or not you took your RMD. They have other (more reliable) sources of the information. The IRS gets copies of the 1099-R forms from the payers. But if you look at the 1099-R information on a wage and income transcript, all the individual amounts on each form are rounded to whole dollars. Either the payers are filing them that way, or the IRS is rounding the amounts when they save the information in their computers. In either case, the amounts are ending up rounded in the IRS computers.

fanfare

Level 15

the rule you are quoting is for a list of amounts on one form.

for 1099-R, you can round the amount in box 1 to the nearest dollar (recommended)

The tax return is in even dollars anyway.

If you are satisfying your RMD by taking to the penny from two or more accounts and worried about it (understandable), you can round up instead of down so the minimum is satisfied.