Inherited Roth IRA incorrectly taxed

[user17731566663]

My inherited Roth IRA distribution should not be taxed, and has never been in the 13 years I have been reporting it in TurboTax. But this year it is giving me a penalty, 25% of the distribution for some reason. I have entered the distribution amount, amount to be taxed entered as zero, distribution code T and went through the person inherited it from and the year of their death. 1040 line 4b gives the correct amount of taxable IRA distributions. Yet form 5329 lists the amount distributed as not including this Roth IRA distribution so there is a 25% penalty which is not correct. How do I fix this, or how do I get Turbo Tax to fix this in their program? 

[Opus 17]

I'm going to ask for help, @dmertz 

Please confirm the date of death of the original owner, your relationship to the original owner, and your age difference from the original owner. 

For a Roth IRA inherited today, there is no required minimum distribution, but you must withdraw and close the entire account by the end of 10 years after the date of the original owner's death.  You can't keep an inherited IRA for 13 years.  

However, the rules were different 13 years ago.  I believe (but I remain to be corrected) is that in order to stretch an inherited IRA longer than 5 years, you must withdraw at least a certain minimum amount every year based on your life expectancy.  If you failed to make that withdrawal, you are subject to penalties.  Or, if you made the withdrawal but failed to indicate it properly, you are subject to penalties.  So you may have entered something incorrectly (or the software could have an error).

But I do want another expert to consult on this. 

[user17731566663]

No, the inherited Roth IRA was from a relative who died in 2012 so it follows the “old rules.” This allows me to stretch it over my lifetime and is not subject to the 10-year rule. I took the required RMD (as I have every year) and it tax free, being a Roth IRA. They must have changed their program this year since this was always correct previously. I was able to go to forms and opened 5329 Additional Taxes and was able to click some more boxes like “This is a Roth IRA” and something about the amount distributed is the amount required (I can’t remember the exact terminology), and it recalculated and eliminated the penalty as it should. 

So I found a work around, but I shouldn’t have had to. 

[Opus 17]

@user17731566663 

Just checking, what's the code in box 7?

If you want me to flag this for higher review, I would need you to go to the help or support menu and select "send file to agent."  This uploads an anonymous version to the tech support database and gives you a token number.  If you post the token number here I will see that a moderator looks at it.  

If something has changed, that could also impact online users who don't have the ability to manually edit the forms.  

[user17731566663]

Hi,

Code in box 7 is T

Will let you know when I get a token number. Definitely would like this fixed for the future. 
Thanks!

[user17731566663]

Token number is 123145774522439-23399173 [restored]

[user17731566663]

OMG they removed the number. That’s wild

[Opus 17]

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@user17731566663 wrote:

Token number is [phone number removed][phone number removed]3

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there's a bot that does that.  you could upload a screenshot, or spell a couple of the numbers.  (894 six seven oh 45) or something like that.  

[user17731566663]

Thanks for trying to help, but I have spent entirely too much time on this already. I tried, but I am done. I figured out how to get around it. Hopefully others will too or maybe Intuit will even fix it. But I have had it with TurboTax. After more than 20 years? I will try to find new software to use next year. The whole process this year was unnecessarily frustrating like it has never been before. You have to jump through hoops to not do it online and not pay their advisors. They’ve lost their way, and a customer.   

[dmertz]

Unless you actually failed to complete the RMD for 2025, this result is due to incorrectly answering the questions regarding how much RMD was required for this inherited IRA and how much of the distribution applied to the RMD.

[user17731566663]

Believe what you want but we actually have 3 inherited IRAs. This Roth IRA and a traditional IRA from the same relative who died in 2012 and another traditional IRA from a different family member who died more recently. All numbers were entered and all of the questions were answered correctly. The only one that had any issue was the Roth IRA which was correctly calculated on the 1040 and shown there to be tax free, but then later was treated as though the RMD wasn’t taken after all and a penalty assessed on the same amount. 
Anyway, I’m sure not many people have this same issue as it is not a very common situation, but I hope they also find a work around. I am finished with this topic, so won’t be looking at replies or responding further.