Inherited IRA - CARES Act allows repayment of 2020 distributions

[A_Dorner]

A major rule change for Inherited IRAs is included in the 2020 CARES Act.

IRS Notice 2020-51 Part III(D) specifies that all 2020 Inherited IRA distributions can be “repaid” (treated as a rollover) back into the same Inherited IRA they came from, if done by August 31, 2020.  This eliminates otherwise taxable distributions, and applies to all recipients – including non-spouse beneficiaries, and also those who have done another rollover within the previous 12 months.

What is the status of support in TurboTax 2020 for this Inherited IRA rule change?   Thank you.

[dmertz]

When you enter the Form 1099-R reporting the distribution, you'll simply tell TurboTax that you rolled the money over to another retirement account (or returned it to the same account) and the amount that you rolled over.  Unlike 2019 TurboTax, 2020 TurboTax will permit you to report the distribution as having been rolled over despite the distribution having been made to a non-spouse beneficiary.

[A_Dorner]

Great, this sounds perfect!

[pcanning]

There is no question as to whether or not the funds were returned to the account or rolled over in the Inherited IRA section.  The amount withdrawn and subsequently returned is showing as taxable on the 1040.

[dmertz]

In some, but not all, versions of TurboTax, TurboTax won't ask the question if you indicate that it was an inherited IRA.  Instead, when TurboTax asks, indicate that it was not an inherited IRA.

[jonjulie]

Is there a solution to this issue?  I'm not able to show the Inherited IRA RMD was returned to the original account per the Cares Act.

[macuser_22]

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@jonjulie wrote:

Is there a solution to this issue?  I'm not able to show the Inherited IRA RMD was returned to the original account per the Cares Act.

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Delete the 1099-R you entered and re-enter.

Answer the RMD question that "None of this distribution was a RMD" or "RMD not required" depending on the TurboTax version - because it was NOT a RMD, there were no 2020 RMD's.

If this is an inherited IRA then answer the "Is this IRA inherited" with NO. The purpose of that question is to PREVENT rolling an inherited IRA over, but is allowed for 2020 only.

Then you will get the screen to say it was "moved" and all rolled over.

Also check the box that this was NOT a COVID related distributions - it was a RMD that was returned.

That will put the 1099-R box 1 amount on the 1040 form line 4a with the word ROLLOVER next to it.

[acegal]

I'm having the same problem.  What about simply putting in "0" for the "taxable amount" in Box 2a?  Wouldn't that be a workaround?

[macuser_22]

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@acegal wrote:

I'm having the same problem.  What about simply putting in "0" for the "taxable amount" in Box 2a?  Wouldn't that be a workaround?

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No, it would not be since that will not put the word "ROLLOVER" next to the 1040 line 4a amount.     See my last post for the proper way to enter it.

[teaparty666]

Hi,

I thought your posting was going to solve my 2020 RMD from an Inherited IRA - it was looking good, got the "Rollover" and $0 after the $ amount taken out as the distribution (and returned to the Inherited IRA) and I clicked NO for it being a RMD Distribution, NO to Inherited IRA and NO to it being related to COVID-19.

However, after completing the income sections, the resulting Picture of my 2020 Income shows the distribution amount as "IRA Distributions - non-taxable" so it shouldn't count as income BUT when I add up the all the income items including the RMD amount, the Total Income shows that it included the RMD amount.  So now I'll be reporting a higher income and be taxed.   I had deleted the 1099-R and re-entered but it still doesn't exclude the RMD amount from the Total Income Summary...

How can I get Turbo Tax to fix this.  

[macuser_22]

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@teaparty666 wrote:

Hi,

I thought your posting was going to solve my 2020 RMD from an Inherited IRA - it was looking good, got the "Rollover" and $0 after the $ amount taken out as the distribution (and returned to the Inherited IRA) and I clicked NO for it being a RMD Distribution, NO to Inherited IRA and NO to it being related to COVID-19.

However, after completing the income sections, the resulting Picture of my 2020 Income shows the distribution amount as "IRA Distributions - non-taxable" so it shouldn't count as income BUT when I add up the all the income items including the RMD amount, the Total Income shows that it included the RMD amount.  So now I'll be reporting a higher income and be taxed.   I had deleted the 1099-R and re-entered but it still doesn't exclude the RMD amount from the Total Income Summary...

How can I get Turbo Tax to fix this.  

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What makes you think that an RMD is not a taxable distribution just like any other Traditional IRA distributions?  Of course it is taxable as  ordinary income.

But for 2020 there were no RMD's at all,so  you did not need to take it,  but if you did then it is taxable.

If you rolled it back then:

Answer the RMD question that "None of this distribution was a RMD" or "RMD not required" depending on the TurboTax version - because it was NOT a RMD, there were no 2020 RMD's.

If this is an inherited IRA then answer the "Is this IRA inherited" with NO. The purpose of that question is to PREVENT rolling an inherited IRA over, but is allowed for 2020 only.

Then you will get the screen to say it was "moved" and all rolled over.

Also check the box that this was NOT a COVID related distributions - it was a RMD that was returned.

That will put the 1099-R box 1 amount on the 1040 form line 4a with the word ROLLOVER next to it.