For non-spouse heir of inherited IRA from 77-yr-old, TurboTax shows additional 10% due on distributions. IRA rules state no additional tax is due. What's right?

Forum|Forum|7 years ago
June 5, 2019
1 reply
33 views

Original IRA owner died in 2016 at age 77. RMD was taken in 2016 and 2017 (along with additional distribution in both years). Inherited IRA owned by 47 yr-old. In 2016, TurboTax Deluxe reported that only regular income tax due (no additional 10% tax). TurboTax Deluxe 2017 is reporting that additional 10% tax is due. That seems to be in conflict with the IRA documentation on inherited IRAs. If the decedent was over 70-1/2 when he died, no additional tax should be due on the inheritance IRA distributions by the heirs.

TurboTax Deluxe Windows

Best answer by fanfare

10 % penalty is never imposed on inherited IRAs, You must have the wrong code on your 1099-R. It should be code 4.

fanfareAnswer

Level 15

10 % penalty is never imposed on inherited IRAs, You must have the wrong code on your 1099-R. It should be code 4.

Kevin92

Level 2

We are running into the same problem now. And yes, we entered code 4 in box 7....which is what the 1099R reflects. Still we get the 10% penalty. We have spoken with a couple different TT live experts, but they are also perplexed.

FangxiaL

Level 10

To resolve your issue, follow these steps:

After you entered the information on Form 1099-R:

On the next screen Do any of these situations apply to you?, check I inherited this IRA
On the next screen Who did you inherit this IRA from?, enter the name of the deceased, and the year the person passed away
On the next screen, answer Yes or No to indicate whether you had any nondeductible IRA contributions
Continue to the screen and answer the question that asks How much of the distribution was a RMD?

As mentioned by @fanfare, the 10% addition to tax is never imposed on inherited IRA distributions.

If you don't take the RMSs from your account, you will be subject to a penalty equal to 50% of the amount that should have been withdrawn.

@Kevin92

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