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CARES Act - returning RMD

Forum|Forum|5 years ago
January 12, 2021
5 replies
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I took my RMD from an INH-IRA in January of 2020. The CARES Act then came out in response to COVID allowing me to return these funds. I was concerned as to how the taxes already paid on this amount would be recaptured. My tax attorney said that my broker would issue a 1099-R that would show that no income was taken out but would indicate what taxes were withheld. However, I just received my 1099-R from my brokerage account today, and it is showing my gross distribution as well. They said that they will issue a 5498 after the tax season to show the money was put back in. How do I indicate what I have done in TurboTax?

1) This gross distribution shouldn't show up as income for the year 2020.

2) I'm not sure what the 5498 is going to do since I am not (under normal circumstances) allowed to contribute to an INH IRA.

Thanks for any advice.

Best answer by dmertz

Your tax attorney is entirely incorrect about what would be reported on the Form 1099-R. Forms 1099-R report only what was distributed from the account and reflect nothing about what was put back. The fact that some or all of the distribution was put back will be reflected on your tax return, not on the Form 1099-R. As you found, the Form 1099-R is required to have the entire gross amount in boxes 1 and 2a, box 2b Taxable amount not determined marked, the federal tax withholding in box 4, code 7 in box 7, the IRA/SEP/SIMPLE box marked and any state tax withholding in box 14.

The Form 5498 will show a rollover contribution, not a regular contribution, of the amount that you repaid to the IRA.

Since RMDs were waived for 2020, no part of the distribution was actually an RMD even though it was taken with the intention of satisfying an RMD. In TurboTax, indicate that the distribution was not an RMD. Indicate that you moved the money to another retirement account (or returned it to the same account), then indicate how much of the distribution you returned to the IRA. TurboTax will include the entire gross amount on Form 1040 line 4a but exclude the amount rolled over from the amount on line 4b. TurboTax will also include the word ROLLOVER next to the line.

If you did not substitute other funds for the amount withheld for taxes so as to complete the rollover of the entire gross amount of the distribution, the amount of the withholding remains distributed, not rolled over, and subject to tax; it's too late to complete a rollover of that portion of the distribution. If the overall tax liability determined on your tax return is less than your total withholding, including the amount withheld from the IRA distribution, you'll get a tax refund.

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dmertzAnswer

Level 15

Your tax attorney is entirely incorrect about what would be reported on the Form 1099-R. Forms 1099-R report only what was distributed from the account and reflect nothing about what was put back. The fact that some or all of the distribution was put back will be reflected on your tax return, not on the Form 1099-R. As you found, the Form 1099-R is required to have the entire gross amount in boxes 1 and 2a, box 2b Taxable amount not determined marked, the federal tax withholding in box 4, code 7 in box 7, the IRA/SEP/SIMPLE box marked and any state tax withholding in box 14.

The Form 5498 will show a rollover contribution, not a regular contribution, of the amount that you repaid to the IRA.

Since RMDs were waived for 2020, no part of the distribution was actually an RMD even though it was taken with the intention of satisfying an RMD. In TurboTax, indicate that the distribution was not an RMD. Indicate that you moved the money to another retirement account (or returned it to the same account), then indicate how much of the distribution you returned to the IRA. TurboTax will include the entire gross amount on Form 1040 line 4a but exclude the amount rolled over from the amount on line 4b. TurboTax will also include the word ROLLOVER next to the line.

If you did not substitute other funds for the amount withheld for taxes so as to complete the rollover of the entire gross amount of the distribution, the amount of the withholding remains distributed, not rolled over, and subject to tax; it's too late to complete a rollover of that portion of the distribution. If the overall tax liability determined on your tax return is less than your total withholding, including the amount withheld from the IRA distribution, you'll get a tax refund.

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chantalita210

Level 2

Thank you so much for this information dmertz. I am in the same situation. So helpful!

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evergreens

Level 2

I am having the same problem and will appreciate any further information that any of the community can add to how to get the return of the RMD to show up in my tax return. I did a IRA to Rorth IRA conversion after returning my RMD so the tax money taken out with the RMD will simply go to the conversion but my 1099R says I did both... Any help appreciated

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dmertz

Level 15

evergreens, a Form 1099-R that (properly) reports the combination of distributions that were rolled over and were converted to Roth is something that TurboTax is not programmed to accommodate. To be able to use TurboTax to report this you must split and enter this Form 1099-R as two Forms 1099-R, one for the portion rolled over and the other for the portion converted to Roth. The dollar amounts on these two separate Forms 1099-R must total to the same amounts as are in the corresponding boxes of the original. The amounts in boxes 1 and 2a must equal each other.

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SAMTT1942

Level 2

I am having same problem on returning funds to my IRA, under the Cares act. How can my gross RMD be adjusted to reflect the amount returned?

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DianeW777

Level 15

You are correct. Answer the RMD question that "None of this distribution was a RMD", because is was not - there was no RMD.

Then you should get the screen that allows you to rollover (roll it back). Be sure you meet the timeframe requirement for putting the money back.

Waiver of RMD for 2020

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Trygve

Level 2

The INHERITED software is not working. The regular RMDs are

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AllenWild

Level 2

I took an RMD and had taxes withheld. As a result of the CARES act I returned the entire amount including the amount of the taxes that were withheld. Turbo Tax reflects the tax amount on my 1099

macuser_22

Alumni - Champ

@AllenWild wrote:

I took an RMD and had taxes withheld. As a result of the CARES act I returned the entire amount including the amount of the taxes that were withheld. Turbo Tax reflects the tax amount on my 1099

The tax withheld should be on the 1040 line 25b to be added to your refund.

**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.**

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SLYKTAX

Level 6

I shall be 72 by the end of October 2022. I believe my 1st RMD must be taken before April 1, 2023 and the 2nd RMD before 12/31/2024 correct?

If my 1st RMD was taken on between 1/1/2023 to 4/1/ 2023. Since I turn 72 in 2022, is that RMD taken in 2023 goes to TAX Year 2022 0r 2023?

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dmertz

Level 15

SLYKTAX, your second RMD will be due by 12/21/2023. If you wait until 2023 to take your 2022 RMD, you'll be completing both your 2022 and 2023 RMDs in 2023.

Your distributions will be reported on the tax return for the year in which the RMD is distributed. You'll want to estimate your combined tax liabilities for 2022 and 2023 to decide whether it's best to take your 2022 RMD in 2022 or in 2023. If you are subject to Medicare Part B or Part D IRMAA, you'll also want to consider the effect on your 2024 and 2025 Medicare IRMAA.