How to report annuity 1099-R income - how to answer RMD question?

[dekieras]

1. I have to take RMDs from a couple of retirement accounts, but I also have qualified retirement annuity income from a couple of other accounts.  It looks like there is no information on the 1099-R form that helps me tell which is RMD versus which is annuity distributions. It looks like the only way I can tell is by matching up the dollar amounts on the 1099-R with my RMD paperwork. Is this true?

2. If the 1099-R is for an annuity, how do I answer the "is this an RMD?" question from TurboTax? The Turbotax help does not explain this, and other question/answers on this site were either contradictory or unclear. I know that annuity income meets the RMD requirement, but it isn't obvious that the annuity income should be entered as an RMD in TurboTax. Can somebody please definitively answer this?

Thanks!

[ColeenD3]

If you receive monthly distributions, it's all an RMD once you reach age 72. It is the responsibility of the issuer to see to it that the requirements are met.

[dekieras]

I'm sorry, ColleenD3, but this really didn't answer my question. Technically maybe this is a "RMD" is some sense, but you're not supposed to have to be a tax expert to use TurboTax.  

Correct me if I am wrong: I think the problem is that the TurboTax question is flawed - normally, an RMD payment is something you have to arrange and the IRS RMD table is relevant. But once you start receiving them, an annuity or pension payment is automatic and the IRS RMD table is irrelevant. I'm guessing that question should be something like "is this an RMD, annuity, or pension payment?" and the questions that next appear help clarify this.

My first question still - stands: is there no way to tell from the 1099-R whether a payment was a regular annuity or pension payment versus a one-time RMD?

[MarilynG1]

Correct, there is no way to tell from the 1099-R whether a distribution was a regular payment or contains RMD.

However, once you are 72, and the payor determines your RMD is 12K for the year, 1K of each monthly payment is RMD and the total distribution shown on the 1099-R contains the total required RMD of 12K, for example. 

You can then safely report in TurboTax that your distribution was all RMD.  

Nothing about that question  goes on a tax return.   The ONLY reason for the question  is to determine  if the distribution was eligible for rollover.

If the distribution is for your RMD for the year, it will be treated as a normal distribution.  The code 7 will be marked in Box 7 on your Form 1099-R. 

Click this link for more RMD Distributions.

[dekieras]

OK, so I will do the calculations to figure out which of the 1099-R's is for a "real" RMD versus annuity and pension payments.  Note that all of these have a code 7 in that box 7,.

So it sounds like your advice for me with my combination of 1099-Rs for real RMDs, annuities payments, and pension payments, then is always respond "yes" to the RMD question in TurboTax and then hopefully the next set of questions from TurboTax will straighten out what is really going on.

[DianeW777]

Yes. You can safely answer 'Yes" to the RMD question in TurboTax if you meet the criteria as explained by our awesome Tax Experts @ColeenD3 and @marilynjoy.  The rules are placed here again for convenience.

Individuals who reached 70 ½ in 2019, (70th birthday was June 30, 2019 or earlier) did not have an RMD due for 2020, but will have to take one by December 31, 2021. Individuals who reach 72 in 2021 (and their 70th birthday was July 1, 2019 or later) have their first RMD due by April 1, 2022

• IRS Most Retirees Take RMD by December 31st

[dekieras]

Here's my understanding that I gleaned from other replies to my question, elsewhere in this forum, and some additional reading.

FIrst, the IRS gets information from the retirement account company both about regular retirement plans and annuities. They can tell from this whether you took the required RMD or not.  Immediate annuities, like the ones I have, do not involve the usual RMD process because the annuity payments are treated as automatically satisfying the RMD requirements for that retirement account. Again, the IRS has all this information. I don't have to say which 1099-R goes with annuity/pension vs. 403(b) etc because the IRS already knows.

So in other words, all of the 1099-Rs I got involve payments that go towards RMD requirements. So the correct answer to "is this an RMD?" is indeed, "yes".  And the next set of questions from TurboTax clarifies the situation further.  Finally, since the requirement income here is all taxed at the same ordinary income rate, for purposes of computing the tax, it doesn't matter which was pension, annuity, or 403(b) etc RMD distribution.

I do think the TurboTax question could have been more clear.  But I'm good for now.

Thanks for your help, everyone!

[AmyC]

Great job! Yes, all RMD if payments are being made. Yes, the IRS knows what you need to be taking. Yes, ordinary income is all the same. The main issues usually are someone forgot an annual distribution so they did not take enough or somebody took money out too young or a disaster happened. 

[kcwyyh]

when I take the RMD before April 1, 2022, does it count for the income of 2021 or 2022?

[JillS56]

RMDs must be taken by December 31 of each year.  The only time a distribution can be delayed is in the year you turn 72 and it is your first RMD.   An account owner who delays the first RMD will have to take two distributions in one year. For instance, a taxpayer who turns 72 in March 2021 has until April 1, 2022, to take his first RMD. But he’ll have to take his second RMD by December 31, 2022.

In answer to your question, unless this is your first RMD distribution, then it any RMDs taken in 2022 would be for 2022.   

If 2021 was the first year you are required to take an RMD and you have not taken the RMD for 2021 yet, then the first RMD would be for 2021 and you will still need to take a second RMD for 2022 in 2022.

@kcwyyh

[dlharfst]

What if the annuity or IRA on the 1099-R is inherited?   That is, box 7 code is 4.

[DaveF1006]

To report an inherited IRA in TurboTax, follow these steps:

1. Federal Taxes: Go to the "Federal Taxes" section.
2. Wages & Income: Select "Wages & Income."
3. Retirement Plans and Social Security: Scroll down to "Retirement Plans and Social Security."
4. IRA, 401(k), Pension Plans (1099-R): Select this option.

You'll need to enter the information from Form 1099-R, which you should have received for the inherited IRA. Make sure to enter the form information exactly as it appears and answer the follow-up questions. The tax treatment of the inherited IRA depends on whether it was inherited from a spouse or a non-spouse.

If you inherited the IRA from a spouse, you have three choices:

1. Treat it as your own IRA by designating yourself as the account owner.
2. Roll it over into your IRA or a qualified employer plan.
3. Treat yourself as a beneficiary rather than treating the IRA as your own.

If you inherited the IRA from a non-spouse, you cannot treat it as your own. You must begin receiving distributions from the IRA under the rules for distributions that apply to beneficiaries.

Where do I show income for an inherited IRA