(TurboTax staff didn't know when I asked them last week.) The alternative is to not include the 1099-R amount in my 2020 taxes, but I fear the IRS will see this missing and audit me. Thank you.
One additional point of information: I separately made the maximum contribution to my own SEP-IRA in the TT software, so do not believe I can add that additional deposit in that field, though perhaps that's a way around TT's software.
Suggestions?
You should just indicate that you rolled the funds over to another pension after you enter the distribution form 1099-R in TurboTax.
Using TurboTax software, I indicated that this withdrawal was rolled back into the Beneficiary SEP-IRA per CARES Act, but that didn't impact my Federal Refund value.
Only when I deleted the value of original 1099-R did the refund go up. Thus, I'm interpreting that the TT software was erroneously not subtracting out this re-deposited RMD.
Any other suggestions? Is there a way to communicate with TurboTax about possible bugs in their software without having to pay for the privilege of speaking to their "tax experts"?
What's your age? If you are not 72, temporarily change your age to 72 in My Info. If you have not deleted the 1099R, delete it then re-enter. Makes sure and enter "None" at the RMD screen. The next screen indicate it was rolled back into a retirement account. The Secure Act made major changes to the RMD rules. If you reach age 70 ½ in 2020 or later you must take your first RMD by April 1 of the year after you reach 72. Make sure and change you age back when completed.
Great idea -- but unfortunately, TT is not giving me that Rollover / Conversion option, per the below screenshot. I don't think TT is letting me do this given its a Beneficiary SEP-IRA, even though the institution holding it said it was alright to do (and they accepted the deposit of the RMD back into the account!).
I even attempted to state that I had made a non-deductible contribution to this account, but that failed to move the "Refund" needle, too.
And when I tested the age approach, that reduced my prospective tax liability a little bit, but not the full amount that eliminating the RMD would have done.
Am going to call the IRS and float my idea of filing the TT version, then go with an amended return thereafter. I obviously don't want to pay tax two times on the same withdrawal.
Thanks, though, for your astute suggestions. As stated earlier, TT software likely has an error in how it is handling Beneficiary SEP-IRAs and CARES Act interpretation.
N
I am just off the phone with the IRS's retirement questions help line. The representative on the call said that her prior two phones immediately before mine were TurboTax users having the same problem I describe above, and that she's received numerous calls over the past week from TurboTax users about this issue. TurboTax's software is NOT allowing some RMDs to be entered as Qualified Rollovers, even though they are.
I don't know whether TT employees monitor this forum, or if there's a way to communicate TT's problem back to the company, but I, for one, might use this experience to use the free IRS e-filing system (which some sons say works just fine) than TT in the future. If I can't trust TT's software, then why pay for it?
N
Since RMDs were waived for 2020, no part of the distribution was actually an RMD even though it was taken with the intention of satisfying an RMD. In TurboTax, indicate that the distribution was not an RMD. Indicate that you moved the money to another retirement account (or returned it to the same account), then indicate how much of the distribution you returned to the IRA. TurboTax will include the entire gross amount on Form 1040 line 4a but exclude the amount rolled over from the amount on line 4b. TurboTax will also include the word ROLLOVER next to the line.
If you have already entered the 1099-R, you will need to delete and re-enter it, but this time, say NO to the RMD questions. If you do that, you will see the option to return the funds back to the account.
Since RMDs are not allowed to be rolled over, you will not see the roll-over questions if you indicate your distribution was an RMD.
Thank you for your response, but again, the TT software is not working properly. Even though I check the box that the distribution is NOT an RMD, I am still assessed a tax liability for the income from this 1099-R.
I am never given the option to indicate that the income on the 1099-R was returned to a retirement account as a Qualified Rollover.
Thus, I am dinged with a tax bill by TT software when I should not be. Your recommend makes total sense, but the TT software is not offering the option you recommend, at least for me.
And again, the IRS agent I spoke with in their retirement section earlier today told me that she has been getting numerous calls from TT customers with this same problem. Please, TT, fix your software! If you do not believe me, contact me and I can demonstrate (via screen-sharing) your software's problem. Thank you
Did you delete the 1099-R and re-enter it? And one other thing, is the RMD you returned from an inherited IRA, code 4 in Box 7? If so, when you are asked if it is an inherited IRA, do not check the box as this will prevent the roll-over options from showing up. But again, delete it first. Going back and unchecking the box won't work to get the roll-over questions.
Thank you! This worked.
Specifically, NOT making the account an inherited account managed to trick the software (even though it is not accurate).
Thank you again
Glad you got it straightened out on your tax return. You are right - saying an inherited IRA is not an inherited IRA is not right. But that question is meaningless on your tax return; it is not included anywhere. The only reason that it is asked in TurboTax, same with the RMD, is to prevent roll-over entries, which are not allowed for either RMDs or Inherited IRAs. They are updating the questions in the 1099-R interview, but there are a lot of covid related changes that still need to be made.