I inherited an IRA from my mother that I rolled over into an inherited IRA account - It shows up as taxable income

[jden1]

I am amending my 2021 tax return since I did not properly report one of my mother's IRA accounts that I inherited.   I have amounts in Box 1 and 2a and 2b is checked.  Box 7 is code 4.  When I enter these amounts and codes it puts the entire amount as taxable.  As I continue - there is no option for indicating this amount was transferred to an inherited IRA account.   

What should I do

[dmertz]

The code-4 Form 1099-R indicates that the IRA that you inherited was distributed to you.  A non-spouse beneficiary is not permitted to then deposit those funds into an inherited IRA as a rollover, which is why TurboTax does not offer the opportunity to indicate that it was rolled over.

If the distribution was paid to you as suggested by the Form 1099-R, the deposit into the new account is an excess contribution subject to penalty unless you obtain a return of contribution before the due date of your tax return.  Even without getting the corrective distribution to avoid the penalty, the distribution is taxable to you.

If instead the funds were paid from your mother's IRA directly to the new inherited IRA and never paid to you personally, this would be a  proper nonreportable trustee-to-trustee transfer and the Form 1099-R should not have been issued.  In this case you would need to obtain a corrected code-4 Form 1099-R showing that $0 was distributed.