Deceased husband's IRA rolled over into my Existing IRA, Turbotax incorrectly reporting my normal IRA distribution as NON-Taxable.

[user17743210726]

2025 tax year:  My husband passed away, I rolled his funds into my existing traditional IRA.  I received two 1099's, one for each of the "before" accounts, listing correctly the withdrawal amount and the same number as taxable.  However when I enter the two 1099's into TT, and specify for my combined account "inherited", it changes the correct taxable amount to zero.  If I remove the indication of "inherited" then the income and taxable amount is correct.  

This is my first year using turbotax, and I'm not impressed.  Scheduled a call, which never happened.  Then had another call, spent over an hour with someone who took 50 minutes to understand the problem with no help.

Would love some assistance.

[LindaS5247]

You should enter each 1099-R individually into TurboTax exactly as they are shown and answer all  follow-up questions.  I am not sure by your description if you received two 1099-R's from multiple accounts of your husband or you received one for your husband's IRA and one for your original IRA that you subsequently took a distribution from. You can come back to this question in Community and provide more details so we can answer more definitively if you like. 

If you are saying that you took a distribution from the combined account, when entering this Form 1099-R into TurboTax it should not be designated as an inherited IRA. The distribution to your account from your husband's IRA is an inherited IRA and it is nontaxable. The distribution from the combined account would not be treated as an inherited IRA and it would be taxable.

In general, if you combined your spouse's inherited IRA funds into your own personal IRA, the funds will generally lose their status as "inherited" and will be treated as your own. So any distribution from your combined IRA would not be designated as inherited and it should show as a taxable distribution.  The Form 1099-R would not have a Code 4 in Box 7. If you believe your Form(s) 1099-R are coded incorrectly, you should reach out to the issuer of the forms to get a corrected one.

Generally speaking, you should not receive a Form 1099-R for moving the funds into your own account, as this is a contribution. The receiving institution reports this as a contribution to the IRS on Form 5498.  

You can enter the form 1099-R for the inherited IRA as follows:

1. Click on Search at the top right of your TurboTax screen
2. Type Form 1099-R in the search box
3. Click on the link Jump to Form 1099-R
4. Your screen will say Your 1099-R Summary. Click on the pencil icon next to the Form 1099-R for the inherited IRA
5. Continue past the screens that say Who gave you a 1099-R? and Who does this belong to?
6. Continue past the screens that say Now, lets review your 1099-R provider info and Enter your 1099-R details from XXX  Note: The code in Box 7 should be 4
7. On the screen that says Where is your distribution from? Select None (if that applies) and Continue
8. On the screen that says Do  Any of These Situations Apply to You? Select I inherited this IRA (for the Form 1099-R that came from your husband's Account(s)) and Continue
9. On the screen that says Who did you inherit this IRA from? Make sure you have answered My spouse and entered his name, and Continue
10. On the screen that says Did you transfer the inherited funds into your own IRA account?   Answer Yes and I transferred in 2025. Then Continue
11. The next screen asks When was XXX born? Select the appropriate box and Continue
12. On the screen that says Did you transfer the gross amount of $XXXX (Box 1) to your own IRA? Answer Yes (if that is what you did) and Continue
13. The next screen will say Good news! You don't owe any taxes on your rollover.

When you roll an inherited IRA into your own IRA, the assets will be treated as your own for tax purposes. Distributions are taxed as ordinary income based on your own age and tax bracket, not your husband’s. If you are under 59½, withdrawals may face a 10% early penalty. Any RMD's will start at your age of 73.
 

Options for Spousal Beneficiaries of inherited IRA:

• You can treat it as your own IRA. You roll the funds into your own IRA. RMDs are calculated using your age.
• You can keep it as an inherited IRA. You hold it as an "Inherited IRA." You keep the funds in your spouse's name. RMDs are calculated based on your life expectancy. You can delay RMDs until the year your spouse would have reached RMD age (73). 
• See this article for additional options. How Does an Inherited IRA Work?

See also:

Is an inherited IRA or retirement plan taxable?

If you have additional information or questions regarding this, please return to Community and we would be glad to help.

[bethhb]

The exact same thing happened to me when doing my mom's return, and I have been using Turbotax forever.  Sometimes the questions it asks are not as clear as they could be.  Our situation was that my dad's IRA was rolled over into an inherited IRA under my mom's name, and then the RMD was distributed.  After the distribution, the remainder of the inherited IRA was rolled over into my mom's existing IRA.  

If your spouse's IRA was directly rolled over into your IRA, with no Inherited IRA as a quick in between to distribute the RMD, then you should follow Expert Linda's advice above.  But then you should not have received a 1099-R with code 4.  If you did (my mom did), then you probably used an Inherited IRA to make the RMD distribution first.  And TT never gave me the question 12 mentioned above, so I could not say that the gross amount in Box 1 was NOT transferred to my mom's IRA.  Which could have definitely helped.

So what I think happened with us is when TT asked if my mom transferred the inherited funds into her own IRA account in 2025(question 10 above), I said yes.  Because they were.  Which incorrectly made the distribution non-taxable.  But because the inherited IRA funds were not rolled over into my mom's account at the time of the RMD distribution, to fix the problem I decided I needed to go back and say that she did not transfer the funds to her IRA.  That made the distribution taxable as it should be.  I'm hoping this correctly solves the problem, but please weigh in Experts if it is not the way to handle it.

[DianeW777]

Yes, you answered the question correctly when you changed it to say 'I did not transfer the fund into her IRA'. 

The reason is that the question is being asked specifically for the amount distributed, required minimum distribution (RMD) on the 1099-R form and not the entire IRA.

@bethhb