Federal return rejected for potential issue with "Taxable inherited IRA". I have a nondeductible Traditional (not inherited) and make backdoor Roth contributions. Help?

[sadiebaglady]

Cannot figure out why IRS is interpreting this as inherited. I've always owned. I make my traditional IRA contribution and immediately convert it to a Roth.

[dmertz]

This might be a new way for Intuit to intercept filings that might have a calculation error due to a bug in TurboTax.

There is presently a problem with tax returns that include Form 8606 Part 1 and distributions from inherited IRAs that is affecting many TurboTax users.  Because the filing itself does not include the details of a Form 1099-R unless the Form 1099-R shows non-zero tax withholding, Intuit's e-filing processor probably can't know if the tax return includes a distribution from an inherited IRA or not and it might be that any tax return that includes Form 8606 Part 1 is getting rejected as a precaution, but I'm just speculating.

@macuser_22 , you might be interested.

[macuser_22]

Interesting.

[macuser_22]

@dmertz - I am starting to think that this might be an internal TurboTax reject because of the inherited IRA issue so that taxpayers do not file an improper tax return.

[gbmtax]

Exact same problem as OP -- non deductible IRA and conversion to Roth. It is NOT an inherited IRA; the "No" box is checked. I filed returns today and they were rejected. 

When I checked filing status of the Federal return in TurboTax, I believe the message stated an update was coming Mar 5th. I just logged back on to get a screen shot of the message and it is no longer there and TurboTax leads me through re-filing. 

Has anyone tried to re-file yet? 

[jg012]

Filed electronically and same thing happened here.  I don't have an inherited IRA and only a Traditional IRA.

[jg012]

Sorry, did not complete my answer to you.  Started to walk through my tax return per Turbo Tax instructions and received the same message.  Have not refiled.  Guess will need to wait until March 5th.

[WCVH]

I got the same notice Friday Evening and it still had the March 5 Updates posting

[dmertz]

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@macuser_22 wrote:

@dmertz- I am starting to think that this might be an internal TurboTax reject because of the inherited IRA issue so that taxpayers do not file an improper tax return.

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Yes, that's what I'm saying too.  I suspect it's an internal reject of every tax return that includes Form 8606 because they have no way of knowing if the Form 8606 has been impacted by the inherited-IRA bug or not.  This is the first time I've seen mention of a reject that seems to be an internal reject to block filing due to a potential effect from a TurboTax bug, so I thought that it was interesting, particularly with no containment article having been issued.

[gbmtax]

Does TurboTax post a list of known issues being worked on? 

[macuser_22]

No. Sometimes there might be a help article.

[gbmtax]

Thanks for the response. 

TurboTax stated in the rejection status, "We are reviewing updates to Taxable Inherited IRA calculations. We expect to have these updates done by March 5th, 2021."

"We expect"... how will we know this problem, apparently grouped together with an inherited IRA calculation problem, is resolved and we can re-file? 

Does TurboTax have a limit as to the number of allowed rejections, ie, if we don't know an update has gone in for sure, re-file and the returns are rejected, does it count against a pre-determined maximum?

Thanks for any insights anyone has. 

[David4000]

How do we know when the update has gone through? My Mac Desktop version just updated today, 2/27 4pm. Do we know if this update fixed the problem with incorrectly rejecting federal returns due to problems with Taxable Inherited IRA?

[dmertz]

This issue has not been resolved by the update that you received today.  The fix is projected to available March 5.

[sadiebaglady]

Thanks to all who have replied. I am happy to know this is not unique to me (not happy some of you were rejected, but at least I know I wasn't singled out for a reason of which I would have no idea). My hope is this is a TurboTax glitch that will be resolved on March 5, as opposed to the IRS flagging it for some unknown reason. I am certain I reported everything (Nondeductible Traditional IRA contributions converted to Roth) correctly on Form 8606, so a TurboTax issue seems like the only reasonable explanation. Take care, all.