Is the taxable amount of the distribution shown on Form 1040 Line 4b?
This 4a/4b problem has kept me from e-filing for a significant refund for over a week. I've applied a bandaid approach suggested by someone (i.e. uncheck the "IRA" box on the worksheet for my RMDs). Why doesn't TT simply fix this error as it is of their making and they are responsible?
The IRS line 4 institutions say that of all of a IRA distribution is taxable to put the taxable amount on line 4b and nothing on 4a.
There are a few exception, but it clearly states for IRA distributions leave 4a blank and enter in 4b
@chrisg0
That's only for a single, fully taxable IRA. Read the exceptions carefully, and you'll find that partially taxable IRA's require the gross amount on 4a and the taxable portion on 4b. Also here is the IRS 1040 instruction for multiple distributions:
For IRA's: "If you (or your spouse if filing jointly) received more than one distribution, figure the taxable amount of each distribution and enter the total of the taxable amounts on line 4b. Enter the total amount of those distributions on line 4a." (page 29 of IRS 1040 instructions)
For Pensions: "If you had more than one partially taxable pension or annuity, figure the taxable part of each separately. Enter the total of the taxable parts on Form 1040, line 4b. Enter the total pension or annuity payments received in 2018 on Form 1040, line 4a." (page 31 of IRS 1040 instructions)
I filed my 1040 and the IRS sent me a refund check for my taxes owed on the IRA distribution––I was informed by the irs phone rep that the 4b amount was automatically removed from the 1040 because of 4a being empty. I have to file an amended return ––turbo tax still blanks out 4a I will fill 4a in by hand and jump through the IRS hoops––this is going to be the nightmare of taxpayers for 2019. Many will spend the refund because the IRS states in the letter that an error was made on tax calculations––bet they will come back for it and penalties to boot. Be prepared to spend the better part of a day on the phone to the IRS getting bounced around––-ask immedietely to be transfered to the tax law specialist (they know what they are talking about)
Seems like the IRS is not following their own instructions that say: "... leave line 4a blank and enter the total distribution (from Form 1099-R, box 1) on line 4b..."
IRS line 4 instructions: page 28-29
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i1040gi.pdf">https://www.irs.gov/pub/irs-pdf/i1040gi.pdf</a>
[quote]
IRA Distributions
You should receive a Form 1099-R
showing the total amount of any distribution
from your IRA before income tax
or other deductions were withheld. This
amount should be shown in box 1 of
Form 1099-R. Unless otherwise noted in
the line 4a and 4b instructions, an IRA
includes a traditional IRA, Roth IRA
(including a myRA), simplified employee
pension (SEP) IRA, and a savings incentive
match plan for employees (SIMTIP
PLE) IRA. Except as provided next,
leave line 4a blank and enter the total
distribution (from Form 1099-R, box 1)
on line 4b
[end quote]
Regarding asking to be transferred to a tax law specialist when talking to the IRS, this issue is not a matter of tax law but is instead a matter of IRS procedure (the behavior of the IRS Automated Underreporter program, the procedures outlined in the Internal Revenue Manual, and the examiner interpreting the IRM), as macuser_22 indicated. Still, an IRS specialist in the area of the reporting of retirement-account distributions will be able to provide better guidance than a first-level IRS phone rep. A first-level phone rep will likely just provide instruction to submit an explanation statement.
@donahuethomas Oh no. Thanks for letting us know. I am either going to mail in my forms or uncheck IRA/SEP. There have been a few other people who reported that because of the issues with 4a the IRS erroneously "corrected" their 1040 and sent them a larger refund than they were due.
@dmertz I did speak with someone in the correct dept. for about 40 mins. yesterday (first rep transferred me) and she advised me that, in my case, everything needed to be included on line 4a. Of course (as many of us know) the TT software is not doing this. I had more than one IRA distribution and a partially taxable pension. My IRA distributions are not being included as part of the gross distribution so line 4a is a few thousand dollars less than line 4b.
You must *NOT* unmark the IRA/SEP/SIMPLE box if it's marked on the Form 1099-R provided by the payer. Failing to mark the IRA/SEP/SIMPLE box when it should be marked can create all sorts of problems.
As macuser_22 indicated, it seems that the IRS is not following their own published instructions for when line 4a should be blank. The IRS has not made public the changes to the Internal Revenue Manual for 2018 with regard to retirement distributions, so it's possible that the IRS instructions for Form 1040 lines 4a and 4b do not agree with what the IRS currently has in the IRM.
When I uncheck the IRA/SEP box there are no changes at all to my refund and no forms are added. However, I am hesitant when it comes to doing this because I don't know if this info is transferred electronically or if it's just the info on the official. I can do an override but then there are warnings about issues with electronically filing.
As per IRS instructions: "More than one distribution. If you (or your spouse if filing jointly) received more than one distribution, figure the taxable amount of each distribution and enter the total of the taxable amounts on line 4b. Enter the total amount of those distributions on line 4a."
AND
"Partially Taxable Pensions and Annuities
Enter the total pension or annuity payments (from Form 1099-R, box 1) on line 4a. If your Form 1099-R doesn't show the taxable amount, you must use the General Rule explained in Pub. 939 to figure the taxable part to enter on line 4b. But if your annuity starting date (defined later) was after July 1, 1986, see Simplified Method, later, to find out if you must use that method to figure the taxable part.
You can ask the IRS to figure the taxable part for you for a $1,000 fee. For details, see Pub. 939.
If your Form 1099-R shows a taxable amount, you can report that amount on
line 4b."
TT has not followed the multiple distribution instruction in the past because when I had more than one fully taxable IRA distribution 15a was always blank but 15 b would show the taxable amount. However, line 16 a and b would be filled in correctly with my pension information. Now that line 15 and 16 have been combined it is confusing if one has a partially taxable distribution (pension, annuity or IRA). Before one could see all of the 1099-R information because pensions/annuities and IRAs were listed separately but now with everything combined this is not the case. 4a needs to include all of the distributions for those of us who have multiple distributions with one or more being partially taxable. As per my previous post, I was advised by the IRS rep that, in my case, 4a needs to include all of my distributions.
IMO, the IRS should have left IRAs and pensions/annuities separate. I tried out one of the free tax programs and all of my information was filled in correctly on 4a and 4b. Everything is also correct on my state form. It's the 1040 that is the issue.
Thank you all for your comments. It seems to me that TT is to blame here as it is their programming that has caused the problem with two RMDs and three pensions not being reported correctly on the 1040. I should not have to study the IRS rules to completely complete my return on TT but rather rely on TT guidance to complete my return. I've used TT since 1993 (or it's predecessor, It's Legal) and I've never experienced anything like this in the past. Maybe it's time to switch to H&R Block?!
@jack021
@avian99
Have you both called TT customer service to complain about this? I have, weeks ago. Maybe if more do so, something will be done. Certainly, weeks of confusion and controversy on this forum haven't produced any change.
And I have already started to look at other products like H&R Block and TaxSlayer for next year. TT has proven they don't care about user complaints, and just employs people that deflect them. Vote with your feet.
@prtaylor56
Yes, I called a few days ago. Was initially directed to put my email address on the mailing list to get an update regarding lines 4a and 4b. I had already done that. The link is buried somewhere in all of the 4a and 4b posts. Was told that many people had called regrading these lines and also told there would be an update this week. My software was updated yesterday but there was nothing addressing 4a and 4b.
Found this in a Knowledge Base Article for Intuit Pro Tax:
"For pensions, if the gross amount received from all pensions is not the same as the taxable amount received from all pensions, both the gross and taxable amount will print on Form 1040. If the gross pension and taxable pension amounts are the same, then only the taxable amount will print on Form 1040. For IRAs, if the gross amount received from all sources is not the same as the taxable amount, both the gross and taxable amount will print on Form 1040. If the gross IRA and taxable IRA amounts are the same, then only the taxable amount will print on Form 1040 unless a conversion from a traditional to Roth IRA was made."
There are several posts in the professional community forum regarding lines 4a and 4b.
@avian99
Your quote from the Knowledge Base says it all, and I cannot understand why so many TT "experts" in the community can't read past the instruction about line 4a being blank if your single distribution is fully taxable. They would see the instruction on multiple distributions and on partially taxable distributions.
By the way, if and when you give up hope that TT will ever fix this, there is a work-around that you might consider. Before explaining that, I want to emphasize that you should never change any 1099-R form itself, especially the IRA/SEP/SIMPLE checkbox. Doing so may cause a mismatch if and when the IRS computers cross-check your 1099-R's against your return, may change TT's tax calculation, and will definitely interfere with some TT error checking.
If you have entered all your 1099-R's completely and correctly, and 4b is correct, and 4a is not blank but is also less than 4b (this will happen only if you have more than one IRA and/or pension distribution, and partially taxable one(s) are being included on 4a, but fully taxable one(s) are not):
1. Switch to the forms view, and find and open the "1099-R Summary" form in the list. This is a TT worksheet. not an IRS form, and is not sent with your return.
2. If one or more of your fully taxable IRA distributions are not being included on 4a, got to Line 1 of the 1099-R Summary form labelled "Total gross distributions from box 1 of from 1099-R". Verify that the number there is correct, as the total of all the gross amounts of your IRA distributions. Now right-click that number and override it with an amount exactly one dollar more. You may have to also override Line 8 and/or Line 10 back to their original amount, if either changes to equal the new amount on Line 1. Now look at your 1040 Line 4a. It should now include the correct total of all your gross IRA distributions, plus one dollar.
3. If one or more of your fully taxable pension distributions are not being included on 4a, got to Line 22 of the 1099-R Summary form labelled "Total gross distributions from box 1 of from 1099-R"). Verify that the number there is correct, as the total of all the gross amounts of your pension distributions. Now right-click that number and override it with an amount exactly one dollar more. Now look at your 1040 Line 4a. It should now include the correct total of all your gross pension distributions, plus one dollar.
So now Form 1040 Line 4a is correct, except for being either one dollar high if you overrode only the IRA or only the pension totals, or two dollars high if you had to override both (which I hope is a really rare case).
read continuation below, as this comment has reached some text limit.
continued from comment above
You will note that TT does not flag these overrides as an error and will check and calculate everything else as before. And the IRS has no way of even knowing that you overstated your gross distribution on Line 4a, unless and until their computers cross check with your 1099-R's and even then I'm pretty sure they don't flag differences of a dollar. And since the taxable amount on 4b is correct, they won't care if the gross amount you reported is a dollar or two higher than what you actually received. They mostly don't like it when you report income that's lower than what you actually received.
No one is suggesting that this is as good as TT fixing this, but it is better than sending in a return with 4a thousands of dollars less than 4b. Plenty of folks have already reported horrible problems with that.
If I do that it just adds a dollar to the taxable amount of my IRAs and nothing to the gross because it automatically changes lines 8 and 10 in the summary to match line 1 so that it appears that the IRAs are still fully taxable. Have to then change 8 and 10 back to the original amount and then the gross of all distributions appear although $1 more than what they should be. Shouldn't have to do any of this and I would prefer not to do this. Thanks for the info.
Some people are receiving the correct refund amount even with line 4a less than 4b. Still don't know why it goes through correctly for some and not for others.
The TT 1040 is actually working as per the Knowledge base information. The gross of my pension is on 4a because it is not fully taxable but the gross distribution from my IRAs are not listed because they are fully taxable. Whether or not this is what the IRS wants who knows. Again, was never an issue when pensions/annuities and IRAs were separated because it was obvious how much one received from the pension and how much from IRAs and how much was taxable.
@avian99
OK, I corrected the instructions to add the Line 8/10 overrides. As far as TT working per the Knowledge Base, the problem is that it doesn't recognize that a single IRA and a single pension is now a multiple distribution, since they are combined on a single line. It's really simple: Line 4a should be blank if all IRA and all pension distributions are fully taxable, and in all other cases 4a should show the total gross distributions for both IRA'a and pensions.
Put another way, Line 4a (gross) should be either blank or larger than 4b (taxable). It should never be the same amount or smaller. That's just elementary sanity, no matter what interpretation you have of the instructions.
@prtaylor56 Yes, I was on the phone for 40 mins. with TT today (2nd call this week) and re-explained that since line 15a/b and 16a/b have now been combined that 1099Rs should be added together and gross distribution listed on 4a if one or more distributions are partially taxable. There needs to be a change in the coding so that this happens. I was told that there are concerns but the 4a/4b "stuff" is not considered an issue. She did send in a report regarding my comments and the request that this be corrected.
@avian99
Yeah - it will only become an "issue" when an influential TT employee sees this problem on their return. But since by definition TT employees aren't retired and receiving pensions or IRA distributions, I guess there is no use waiting for that to happen.
I was hesitant to e-file because of 4a<4b and because IRS agent told me 4a>4b but I e-filed last Friday and my refund was direct deposited today and it's the correct amount.
@avian99
Glad to hear it. Different filers reported different outcomes with 4a < 4b. Just glad it's over for this year (I got my expected refund after filing with 4a "corrected" by my edit).