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Level 2

Question

2020 RMD Reversal

Forum|Forum|5 years ago
January 14, 2021
34 replies
151 views

In Jan. 2020 I took an distribution from one of my IRA accounts intending that it satisfy part of my RMD. With the subsequent IRS waiver of RMDs for 2020, I returned the exact amount of this distribution in Aug. back into another one of my IRA accounts. Since I will be receiving a 1099-R for the distribution taken in Jan., how can I report this in TT to reverse the distribution as being reported as taxable income?

VolvoGirl

Level 15

Since there is no RMD required for 2020, then after you enter the 1099R say it was NOT an RMD and then that you rolled it over (even if back into the same account). Was any withholding taken out? If it was then did you replace the withholding with your own money? Otherwise the withholding will be a taxable distribution itself.

smreed48

Level 3

How to answer the RMD question is not intuitive. I think TT should have provided a LOT of guidance/help in dealing with this item. Inherited IRAs are supposed to get same treatment as regular IRAs but TT doesn't ask if you rolled over/redeposited the amount. I went back and changed in TT "no RMD required" for the regular IRAs and Inherited IRAs, it says regular IRAs distributions won't be taxed and if you go to the taxable summary it shows them as not taxed. However, Inherited IRAs (supposed to get same treatment as regular IRAs) but TT shows it as taxed in the taxable summary. Further, on the 1040-SR, it carries the the returned Inherited IRA distribution down to the AGI.

I don't feel comfortable with TT at the moment.

dmertz

Level 15

If you are a non-spouse beneficiary and you indicated that any part of the distribution from an IRA was an RMD, you must presently delete and reenter the Form 1099-R and upon reentry indicate that none of the distribution was RMD. TurboTax will then properly handle your indication that the distribution was rolled over.

rjfertalAuthor

Level 2

Yes, I got my answer to my question, and the solution worked. In short, if one responds in TT that the original distribution was NOT and RMD the system will then prompt you by asking what did you do with the distribution. An optional response is that you rolled it into another qualified plan. That results in the distribution not being included on form 1040, line 4b (i.e., it's not taxable) and "rollover" being inserted.Note that you may need to edit the original entry for the 1099-R transaction to get the correct prompts for this to work.

FYI, I found Notice2020-51 on the IRS web site which says that the usual 60-day rollover period for certain distributions was extended to August 31, 2020.

Thank you all for your help.

SanDieggo

Level 2

I see several "work arounds" involving altering entries on 1099's. Won't that trigger a response from the IRS in that their copy of your 1099-R does not align with what you coded on the TT version of the 1099-R? On my 1099-R box 2a show the full amount is taxable, box 2b is checked off as Taxable amount to be determined, Box 7 show code 7 Normal Distribution with an"X" in the IRA/SEP/Simple. I played around with altering these entries and yes it does the job of presenting the "correct" disposition of the transaction on 1040 line 4b. But we should not have to play games with figuring this out. TT dropped the ball majorly on this one. Perhaps too many H1B "geniuses" in the mix back at coding central. TT needs to come up with an update that handles this cleanly This is FUBAR

dmertz

Level 15

Telling TurboTax that the distribution was not an RMD is not a workaround, it's the correct answer to the RMD question and is the answer required to be able to properly report this rollover. Enter the Form 1099-R as received, indicate that none of the distribution was RMD, indicate that you moved the money to another retirement account or back to the same account, then indicate the amount that was rolled over.

tho5

Level 2

I reversed my RMD after the CARES Act was passed also. TT tried to edit their instructions re: this but didn't succeed.

They did add parenthetical text to address the 2020 situation:

What did you do with the money?

__Moved the money to another retirement account (or returned it to the same account)

But then,

Choose which of the following applies:

__rolled over all of the money OR

__rolled over a partial amount of the money.

The problem is that TT defines "rollover" as "moving the money to a different retirement account." In my case, I moved it to the same account, but the software would not let me ignore the "Choose which " question since it doesn't address my situation.

As a guy who spent much of his career parsing contract language, I am not comfortable with checking "rolled over all of the money", but am just going to chalk it up to sloppy editing on TT's part and forget about it.

Just sayin'

macuser_22

Alumni - Champ

@tho5 wrote:

I reversed my RMD after the CARES Act was passed also. TT tried to edit their instructions re: this but didn't succeed.

They did add parenthetical text to address the 2020 situation:

What did you do with the money?

__Moved the money to another retirement account (or returned it to the same account)

But then,

Choose which of the following applies:

__rolled over all of the money OR

__rolled over a partial amount of the money.

The problem is that TT defines "rollover" as "moving the money to a different retirement account." In my case, I moved it to the same account, but the software would not let me ignore the "Choose which " question since it doesn't address my situation.

As a guy who spent much of his career parsing contract language, I am not comfortable with checking "rolled over all of the money", but am just going to chalk it up to sloppy editing on TT's part and forget about it.

Just sayin'

A rollover does not specify the account that it was rolled to. It can be the same account an in the case of a returned RMD probably will be the same account. The only thing that goes on the tax return is the amount on line 4 of the 1040 for with the word ROLLOVER next it. The account is irrelevant.

"Rolled over all the money" simply means that all of the 1099-R box 1 amount was rolled over.

"Rolled over a partial amount' means that only some of box 1 was roller over and the rest was kept by you.

This part of the 1099-R interview has not changed for many years.

The desktop version looks like this - seems clear enough to me.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

lordguido

Level 2

They did add parenthetical text to address the 2020 situation:

Where is this ?

I find there's a problem linking 1099R with 1040 ....1040 line 4a should be linked to 1099 1 Gross Distribution.

Also if you don't check 2b Taxable not determine, the amount on line 2a should go to 1040 L4a ...it doesn't.

Any amount in 1099 #1 to goes to 1040 L4b.

The proper way to report RMD partial reversal is to report the Gross L4a and taxable amount on L4a and write "Rollover" on L4b.

Any suggestions?

cbentzen

Level 2

I am not getting a screen that ask me if the contribution is an RMD? So I can't follow the instructions that I've found on the website.

macuser_22

Alumni - Champ

@cbentzen wrote:

I am not getting a screen that ask me if the contribution is an RMD? So I can't follow the instructions that I've found on the website.

What are you trying to do?

What code is in box 7?

Is the IRA/SEP/SIMPLE box checked?

Did you delete the 1099-R and re-enter?

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**