I use Turbotax Business to file fiduciary returns for a trust. I’m confused as to how Turbotax Business handles different types of 1099-R income, specifically as it relates to the Net Investment Income Tax that only applies to certain types of 1099-R income. As I understand it, qualified annuity income is exempt from NIIT, but non-qualified annuity income is not. This trust has a large amount of non-qualified annuity income. Yet Turbotax Business (unlike Premier) only has a single box for entering the amount of a 1099-R distribution. I assume this is for Box 2a. But nowhere does it let you enter any other information about where the amounts came from. For example, there is no place for the distribution codes (Box 7).
When the beneficiary K-1s are generated, what happens to this income? How does Turbotax Business know whether it should be subject to NIIT, if it doesn’t have a place to tell it that? On the beneficiary K-1s it generates for me, there is an amount in Box 5 representing each beneficiary’s share of this non-qualified annuity income. There is an identical negative amount in Box 14H, showing that this income is exempt from net investment income tax. But I doubt if this is correct. How did Turbotax come to that conclusion, and what should I do?
