I received a death benefit from my Mother's TSP and did a direct rollover via my Schwab account to create an inherited IRA during 2021. The check went directly to Schwab, establishing the inherited IRA. When entering the Thrift Savings Plan 1099-R into TurboTax, the total distribution block in 2b is checked, and block 7 shows 4 (death) and G (Direct rollover).
My question is: Why is TurboTax showing the entire amount of the TSP distribution (that was a direct rollover to an Inherited IRA) as all taxable this year? The only taxes that should be paid are when I am receiving a distribution from the inherited IRA, within the period I have to take the distributions.
You are correct, this is not a taxable transaction. Make sure that both distribution codes are being reported in TurboTax. If you imported the form, check manually to make sure both code 4 and code G are in there. When entering Form 1099-R, under box 7, select the box I have more than one value in Box 7. Put 4 as the distribution code in one, G in the other.
Once you verify that you did not convert this to a Roth, the entire rollover will not be taxable.
You are correct, this is not a taxable transaction. Make sure that both distribution codes are being reported in TurboTax. If you imported the form, check manually to make sure both code 4 and code G are in there. When entering Form 1099-R, under box 7, select the box I have more than one value in Box 7. Put 4 as the distribution code in one, G in the other.
Once you verify that you did not convert this to a Roth, the entire rollover will not be taxable.
Also make sure that the Form 1099-R has a zero in box 2a, otherwise the TSP is reporting that it's a taxable rollover to an inherited Roth IRA (which is one of the options on the TSP-81 form).