Beneficiary of an inherited IRA

[dj2]

I inherited a traditional IRA from a parent who passed in 2010. Back then when I was named beneficiary on the IRA, the assets would be distributed over my life expectancy. I've taken the required minimum distribution each year governed by the life expectancy IRS rules ever since 2010. I've had 10% federal withholding on each distribution I've ever taken. There was no basis in the decedent's IRA when the IRA was set up with me as beneficiary

This is the first year while filing my 2023 return that I'm really confused. The software is not calculating any federal tax owed on the distributions I've taken in 2023. The software just calculates 100% of the amount of Federal withholding on all distributions in 2023 being refunded which is the entire amount in box 4 of the 1099-R.   I haven't filed yet. Something is wrong. 

I can't imagine this having anything at all to do with new beneficiaries of retirement accounts in 2020 subject to the 10 year rule. Then in 2022 the IRS proposed additional changes on RMD's for 2020 beneficiaries. Then again in 2023 on missed RMD's and where final guidance still hasn't passed.

I'm so confused on what's going on. The only thing I can think it might be is the software.  This is NOT a Roth IRA.  And no, I did not make any MISTAKES. I triple checked   

[Critter-3]

Review the 2023 return next to last year's 2022 return to see what changed ... did your total income go down to the point where you have no taxable income thus a refund of all the withholdings would be correct.   Have you entered in ALL your income yet ?   Until you have completed the entire program interview you should ignore the Refund-O-Meter.  

Please follow the instructions below to preview your tax return before filing.

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Please follow the instructions below for a copy of your tax return after filing.

How do I get a copy of a return I filed this year ...

[dj2]

This year's tax filing season pertaining to Traditional IRA's should be no different than last year's tax filing season (2022). I file single status.

In 2022, just say for example $30,000 was needed in withdrawals from the IRA. For simplicity, let's say that $30,000 was the adjusted gross income for 2022 and no adjustments could be made to that income to reduce the amount.

Then the first $10,275  of that income was taxed at 10% in the 2022 season. The taxable income from $10,276 to $41,775  (which comes to $19,725) would be taxed at the 12% rate. 

So the total amount in taxes to be paid in 2022 would be $1,027.50 on the first $10,275, plus  $2,367 on the $19,725 at the 12% rate which comes to the total of $3,394.5

I know how taxed distributions are calculated. I know what the tax is for the distributions in 2023

Would somebody please tell me I'm not losing my mind

I've never seen this happen before.

[dj2]

I reviewed the 2022 return with the 2023 return. 

@Critter-3 My total income went UP in 2023 from 2022. I entered all my income.

I finished all interview questions. I didn't completely go through everything though right up to the very end of the program

So perhaps,  you're correct

Refund -O- Meter will change if I complete the entire program

[dmertz]

Did you mistakenly enter a zero in box 2a of TurboTax's 1099-R form.  Since there was no basis in nondeductible traditional IRA contributions, box 2a is required to show the same amount as is in box 1.

[dj2]

@dmertz 

No I did not enter a  zero in box 2a

I entered the same amounts in box 1 and box 2a

[dmertz]

Is the problem that TurboTax is not including the income on Form 1040 line 4b or that TurboTax is including on line 33 too much in taxes paid and tax credits?  I can't imagine any reason that TurboTax would not include on Form 1040 line 4b the entire amount from box 2a of the Form 1099-R when the Form 1099-R has code 4 in box 7 and the IRA/SEP/SIMPLE box marked.

[dj2 · Accepted solution]

@dmertz 

I know where the problem lies

The IRS announced a delay of final rules governing inherited IRA RMDs  . . .        EVEN though the Internal Revenue Code pursuant to legislation of the Secure Act 1.0 and Secure Act 2.0 of the Consolidated Appropriation Act does not or will not bear any affect on my IRA.

https://www.irs.gov/pub/irs-drop/n-23-54.pdf

When I completed the program up to the very end,  one error / inconsistency shows.

Form 1099R is not final.  I have to wait for the software version update in order for the program to calculate my return correctly

Way to go IRS.  Last year they held my refund for over 3 months  correction - 4-1/2 months.  Never in my entire tax filing life did that ever happen    

[dmertz]

Nothing about a Form 1099-R for a distribution from a distribution from an inherited IRA prevents the tax return from being filed now.  All of the related forms have been already been approved for filing.  However, even if something related was still not yet approved for filing, TurboTax would still be doing the calculation correctly because nothing has changed from 2022 with regard to calculating the taxable amount of this distribution.

Examination of the forms, schedules and worksheets in your tax return will explain how your tax liability is being determined and will identify the reason for the disagreement between that and your expectations.

[dj2]

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@dmertz wrote:

Nothing about a Form 1099-R for a distribution from a distribution from an inherited IRA prevents the tax return from being filed now. 

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If I filed now with no tax owed on the distributions, the return would surely be flagged.

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@dmertz wrote:

However, even if something related was still not yet approved for filing, TurboTax would still be doing the calculation correctly because nothing has changed from 2022 with regard to calculating the taxable amount of this distribution.

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That's my point. Something is related and its still not yet approved for filing. The IRS delayed the ruling until 2024. 

I can almost guarantee that the reason my refund on my 2022 return was delayed for months was because of this long legislation issue going on. They held my refund for absolutely no reason !

If I were to file now (and I'm not going to) it would be flagged for two issues :

1.)  because the return involves an inherited IRA and RMD's .

2.)  because of the miscalculation on the tax owed for distributions