Error: TT will not allow you to eFile if a 1099-R does not have "Total Distribution" box checked and Percent field filled in

[jh777]

This might sound like an error, but is not.

The firm that had an inherited annuity provided me a 1099R.  The annuity was to be distributed to me and my sister, equally split 50%/50%.   The company was able to send the funds to me in 2024, but had difficulties fulfilling my sister distribution until 2025.

So my 1099-R correctly shows that I received my 50% of the annuity, which is the total annuity amount I was expected to receive, but that the overall annuity was not completely distributed until 2025.  I suspect this is required because there's a possibility the remainder could pass to me if my sister was unable to eventually receive it.

TT should still allow my taxes to be eFiled.   TT should maybe pose a question to understand that a situation like this could occur and allow the eFile to proceed if the response shows that this was not an error.

[dmertz]

Yes, this is an unusual situation where what is ultimately a total distribution spans two calendar years.

The IRS instructions for box 9a say that the percentage is to be entered if the distribution is a total distribution made to more than one person.  In this case, the distribution to you was not a total distribution and the payer should have left box 9a blank or it did constitute a total distribution and the Total Distribution box should have been marked by the payer.

I would probably just mark the Total Distribution box on TurboTax's 1099-R form.  The marking of the Total Distribution box really only has significance in the context of a lump-sum distribution from a qualified plan that qualifies for special tax treatment on Form 4972, for which this distribution would not qualify.

The other option would be to leave box 9a blank.  The percentage in box 9a has no bearing on the tax treatment on your tax return.

"I suspect this is required because there's a possibility the remainder could pass to me if my sister was unable to eventually receive it."

That's not a consideration for how Form 1099-R is prepared.  You would directly inherit your sister's portion only if your sister disclaimed within 9 months.

[jh777]

Thanks for the feedback.

This 1099R is for "inherited" IRA annuity which rolled into my own inherited IRA at another firm at the time it was split.  It is considered a tax free transaction until I begin withdraws from the inherited IRAs.  In fact, I have another 1099R for the RMD at the firm holding the inherited IRA.    So I don’t know if that changes your suggestion on how I should handle this error in TT.

I thought of trying your suggestion initially, but I was concerned that the IRS would see that the 1099R entry in my tax filing and the one sent by the brokerage wouldn’t match, resulting in an automatic audit.

I still think it’s an error TT should eventually ignore after enough questions or confirmations to proceed despite the error, unless the IRS explicitly requires TT to pass this check before allowing an eFile.

[dmertz]

Given that both you and your sister were 50/50 beneficiaries, I suspect that you are not the surviving spouse of the decedent.  Therefore, if the decedent's account was an IRA (IRA/SEP/SIMPLE box marked on the Form 1099-R in question), it was not permitted to be moved by distribution and rollover.  Such an inherited IRA is permitted to be moved only by nonreportable trustee-to-trustee transfer and no Form 1099-R for that transfer should have been issued.  If a distribution was truly made from the decedent's IRA, the distribution is entirely taxable in the same manner as it would have been had the entire amount been distributed to the decedent before death and depositing the proceeds into an inherited IRA would then constitute an excess contribution that is subject to penalty unless corrected by a return of contribution.  Given that, I thin k that the appropriate thing to do would be to simply leave box 9a blank on  TurboTax's 1099-R form (assuming that this was not a trustee-to-trustee transfer of an IRA in which case the financial institution needs to issue a corrected From 1099-R showing $0 distributed).

If the decedent's account was instead an account in an employer's qualified retirement plan, that would be moved only by distribution and direct rollover (codes 4 and G in box 7 of the Form 1099-R, the IRA/SEP/SIMPLE box unmarked).  In that case my previous reply still stands.

I don't think that there is a bug in TurboTax.  The instructions for Form 1099-R seem to imply that box 9a should be left blank if the Total Distribution box is not marked, and given that the remainder of the account was not distributed in the same single calendar year, it seems appropriate that your Form 1099-R should not have the Total Distribution box marked.  In fact, whether the distribution was from an IRA or was a direct rollover from a qualified retirement plan, the instructions for Form 1099-R indicate that box 9a should be left blank whether a Total Distribution or not.