How does TurboTax handle SECTION 204 OF SECURE 2.0 for annuities with regard to RMD?

[scschulte]

I turned age 73 in 2025 so when completing my 2025 US Income taxes in 2026 I need to show that I met the Required Minimum Distribution (RMD) withdrawal amount during 2025 (based on my IRA and 3 annuities values on 31 December 2024). SECTION 204 OF SECURE ACT 2.0 enables me to take credit towards my RMD for amounts withdrawn in my annuities that is higher than the annuity RMD amount.  So if my 3 annuities show withdrawals HIGHER than the RMD amount I can use those values to offset my IRA RMD (which is my case). How is that handled in TurboTax? 

[Opus 17]

The Turbotax implementation of the RMD issue for IRAs was somewhat confusing in the 2024 program.  I think all of us on this board hope they revise it for 2025, so I don't think there is much point in describing the 2024 version for now.  If you are confused when you start to work on your 2025 tax return, come back and ask.

[scschulte]

Dear Opus17 - Thanks for your fine reply!  I should get my Mac version of TurboTax for 2025 by Nov 2025 (but often it's not really "ready" for IRA and annuity payments until Feb the following year…).  What I did is use the 2024 version as though it was going to be for the 2025 tax year and changed my birthdate to show me as age 74.  I got the RMD questions -- and basically it seemed to work.  Example:  For 2025 I have an RMD (not real figures) of $30,000 for my standard IRA.  I calculate my RMD but the IRA company does NOT issue a form 5498 - And I find that a bit strange as how else can the IRS know my 31 Dec xxxx IRA balance……??  A 1099-R does NOT provide that information). I also have 3 annuities (3 different annuity providers who each send me form 5498 - got them already by 1 June 2025).  OK so for Secure Act 2.0 I calculate and I see that Annuity A had and RMD of $2000 but actually paid me $4,000.  Annuity B had an RMD of $3,000 but actually paid me $5,000 and Annuity C had an RMD of $6,000 but actually paid me $9,000.  So from these 3 annuities I have an amount to offset my IRA RMD:  Offset $ = ($4k-$2k) + ($5k-$3k) + $9K-$6k) = $7,000 of offset against the $30,000 RMD in my IRA.  So I declare having withdrawn $23,000 from my standard IRA (which I of course will do in 2025) and TurboTax didn't have any issue with that.  /// Again, thanks for your reply and if you or others have any other comments, I'd appreciate receiving them.  Steve on Tuesday 15 July 2025.

[SteamTrain]

@scschulte 

I'm pretty sure you cannot use your RMDs from the annuities against the RMD from the IRA.

All traditional IRAs can be lumped together to determine the RMD to be taken from any/all of the IRAs, BUT they have to be actual IRAs.   Thus, the $30k RMD for your IRA has to be taken in full, and the RMDs for the annuities are determined each separately.  Likewise folks with pensions or TSP/401k accounts have RMDs that must be calculated and taken entirely separately from each other....as they are not IRAs.

((But I'm not sure how so-called annuitized IRAs fit in...(if at all))))

@Opus 17   @dmertz    Have I got that right...comments?

[dmertz]

Changes made by the SECURE 2.0 Act allow the RMD for an IRA annuity to be aggregated with the RMDs of the individual's other traditional IRAs, so distributions from the IRA annuity in excess of the amount required to be used to satisfy the RMD of the annuity can be applied to the RMD requirement for other IRAs.  Generally, the annuity company would have to provide the valuation of the annuity needed to determine the RMD requirement of the annuity to be able to determine the amount distributed during the year from the IRA annuity that is excess to the RMD requirements for the annuity.

[scschulte]

Hello dmertz,

Thanks for your fine reply!  And yes I do believe that what you have written is correct.  (Another person replied saying this was not the case but he/she was likely not aware of SECTION 204 OF SECURE 2.0 for annuities).

But my concern now is this:  How will TurboTax handle this?  Also if the Financial company holding the IRA does not send the IRS a Form 5498 to indicate the 31 Dec xxxx IRA value - then how will the IRA know the RMD amount for that IRA?  (My 3 annuities provide form 5498 so not an issue there).  How will TurboTax handle all this?

So I guess I'm really addressing this issue to Intuit / TurboTax and they don't seem to be replying -- I'll likely have to telephone them but will wait until the TurboTax 2025 version comes-out (earliest Nov 2025 but likely Feb-March 2026 before RMD's and similar 1099-R issues are included).

Thanks very much for your reply!  Please don't hesitate to comment further.

Steve on Friday 18 July 2025

[scschulte]

Hello SteamTrain,

What you wrote was the way this was handled for RMD's prior to 2023 and SECTION 204 OF SECURE 2.0 for annuities.  (And one can still handle RMD's in this way - so if an annuity does NOT pay out enough to satisfy its RMD then one can simply go back to the "old" way and indicate that whatever the annuity paid-out satisfies the RMD for that year.  In that case the full RMD calculated for the IRA would have to be withdrawn as there are no "IRA Annuity" offsets).  [Still wondering how the IRS knows the 31 Dec xxxx value if the IRA Financial company (JP Morgan; LPL, whoever) doesn't issue a form 5498 in May of the following year indicating the 31 Dec xxxx amount…  Hopefully TurboTax will address that]

Thanks for any further comments.

Steve on Friday 18 July 2025

[Opus 17]

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@scschulte wrote:

So I guess I'm really addressing this issue to Intuit / TurboTax and they don't seem to be replying -- I'll likely have to telephone them but will wait until the TurboTax 2025 version comes-out (earliest Nov 2025 but likely Feb-March 2026 before RMD's and similar 1099-R issues are included).

---

Except for January to April, this forum is staffed by volunteers, and even the Turbotax employees who answer questions are experts on tax preparation, not the programmers.   As I already mentioned, the RMD interview was very confusing for 2024 and probably needs to be improved, but no one will know whether that has actually happened until they release the 2025 program.

Now, in point of fact, you can lie to the program to get the right answer and the program won't know or care, and the IRS won't care as long as you followed the rules.  The general complaint for 2024 was something like, Turbotax wanted each IRA to have an RMD instead of allowing you to withdraw from one account to cover all RMDs that can be aggregated.   The only reason you need to know if you withdrew less than the RMD is that you owe a penalty, and the only reason you would care if you withdrew more than your RMD is that if you want to do something like a Roth conversion from a traditional IRA, you have to withdraw the RMD first, then you can do the conversion, so Turbotax wants to know that your withdrawal (plus other income) was large enough to satisfy the RMD and the conversion.  So you can lie to the program.  If you have an annuity and 2 IRAs, and you determine the aggregate amount of the RMD, and withdraw it all from one account, and don't have 1099-Rs for the other accounts, Turbotax won't know about the other accounts, and you can just tell the program that the 1099-R that you do have is equal or more than your RMD. 

[dmertz]

I agree that the way that 2025 TurboTax will handle RMDs is likely to be different than in 2024 TurboTax.  However, I think that it is unlikely that 2025 TurboTax will calculate the RMD required of a particular account, the same as before, but will require you to tell TurboTax the amount of RMD required, then will simply compare what you enter to the amount of distribution being reported.  There could be some changes to the way that IRA aggregation is handled, but there will always be a way to give TurboTax entries that prevent TurboTax from preparing Form 5329 when there is actually been no excess accumulation in the IRAs.

[SteamTrain]

Certainly, use the advice of the others who posted and are far more knowledgeable than myself.

It wasn't clear to me how IRA annuities were to be handled.

Except for the changes that "might" occur in the software for 2025 taxes, you probably now have a fairly decent handle on it...with some work yet trying to figure the actual RMD amounts for the annuities themselves.