IRA RMD Penalty seems to be incorrectly calculated in TurboTax Deluxe desktop Win 11 025.000.0230

[LosRubios]

I received two IRA distributions in June and December 2025 totaling $759 and the RMD for 2025 was $660 (it is a small retirement account and my only one). It is not my first year receiving an IRA distribution. I put this info into the IRA section of TurboTax Deluxe desktop and scrolled through the prompts and it indicates that an RMD penalty has been calculated even thought the IRA Distribution amount I received is $100 more than the amount of the 2025 RMD.

I then get to the "Let's go over any required minimum distributions (RMD)" section and click on my name. I then check 'No' to the "Let's check if you missed any required distributions" section and continue to the next page.

The next screen is "Do you want to request a waiver to reduce the penalty?" and it indicates that "We've calculated a penalty of $165 based on the amount not distributed in 2025. However, if you can show the IRS that you missed the RMD due to a reasonable error, and you are taking appropriate steps to remedy the shortfall, they may waive some or all of the additional taxes."

If I go back a few pages and check 'part of this distribution was for the RMD' or 'All of this distribution was for the RMD' I continue to get the same result.

Even if I delete the IRA, save the TurboTax file, reopen it and add the IRA details all over again, I get the same message.

It looks like there is a similar RMA penalty calculation error to the one that was being highlighted in the discussion groups last year in early 2025.

There is no basis for an RMD penalty to be calculated.

[fanfare]

To work around issues with 2024 TurboTax RMD handling,

to avoid wrongful penalty, for each 1099-R, tell TurboTax that the distributed amount is the calculated required amount.
OR

to avoid wrongful penalty, for each 1099-R, tell TurboTax that the calculated required amount is -0-.

Reply back if this fixes your problem with 2025 TurboTax

@LosRubios 

[LosRubios]

@fanfare Unfortunately, the only way I can get it to back it out is to 'appeal the penalty' on the subsequent pages. If I state the RMD as 0 or the Gross Distribution amount, it still adds on a $190 (25%) penalty. So I reverted to the actual distribution and IRS table numbers for 2025.

The only way I can get it to back the penalty out of the Federal Tax Due is to answer 'Yes' to the 'Do You Want to Request a Waiver to Reduce the Penalty' and explain that the RMD is $660 according to IRS Table II.

I even deleted the IRA from TurboTax and then saved the file and re-entered it and noticed that the problem seems to be that TurboTax is using the reported Gross Distribution as the RMD, since on the page 'How much of your RMD without a corrective distribution as you requesting a waiver?' in the appeal process, it then states 'Tell us how much of the $759 in RMD you want the IRS to waive to reduce your penalty.'

I double checked my IRA entries in TurboTax and I had correctly stated the Gross Distribution as $759 and the RMD as $659, so this appears to be an internal TurboTax Deluxe error whereby it is using the Gross Distribution as the RMD amount and not the actual RMD amount that was entered by the user.

To get it to back out the penalty altogether, you have to look at the RMD amount ($759) stated on this appeal page and then enter that same amount in the 'RMD Amount you want the IRS to waive tax on' box on the page.

It seems like it will need an update from Intuit to correct this problem however I have no plans to pay to upgrade my TurboTax license just so I can tell them that their product isn't working properly. They can figure that out for themselves.

[fanfare]

Based on what you say, TurboTax 2025 is in worse shape than TurboTax 2024 for RMD processing.

Wait until Valentine's Day for more updates before e-Filing.

@LosRubios 

[VolvoGirl]

Have you updated the program?   Go up to Online - Check for Updates.  You should also check if your Windows needs updating.   Try closing and re opening the program.   You have a 1099R with 759 in box 1?  What is the code in box 7 and is the little IRA box checked?   @dmertz 

Oh I just remembered, when I entered my inherited IRA that has an RMD it did pop up form 5329.   I went into Forms and deleted the 5329 and it hasn’t come back.   I’ll try entering that 1099R in a test file to see if it gets created again.  

[LosRubios]

@VolvoGirl 

The laptop is running Windows 11 and is up to date (only bought it in late November '25)

The TurboTax Deluxe 2025 for Windows software is up to date - didn't buy the ESD download until last week and it seems to update itself every time I open it!

The 1099-R has code 7 in Box 7 and the IRA SEP/SIMPLE box is checked.

I actually deleted the IRA, re-saved the file without the deleted IRA, closed TurboTax and reopened it and re-entered all the IRA info with the same result.

Internally, TurboTax seems to be pulling the Gross Distribution as the RMD and using that for its calculations. 

There is no way that two equal IRA distributions in June and December with federal tax deductions should be resulting in a 25% penalty when the distributions total $100 more than the RMD from the IRS' 2025 Table II calculations. 

[fanfare]

combine your two 1099-Rs into one, and tell TurboTax that the distributed total is the calculated RMD.

TurboTax does not refer to the tables in Pub 590B.

@LosRubios 

[LosRubios]

@fanfare I don't have two 1099r's, just one with two distributions during 2025 - one in June and a second in December. Both are from the same traditional IRA, so only one 1099r.

[GabiU]

Hello @LosRubios 
Thank you for reaching out and sharing your experience, we would like to investigate this issue further.  If you’re willing, we would like to ask if you could provide a Diagnostic File of your return. This copy will be purged of all personally identifiable information. Please follow the instructions provided below to get us the information we need. 

TurboTax Online​

1. Sign-in to your online account. ​ 
2. Select "Pick up where you left off"
3. Click on “Tax Tools” to the left hand side of the screen. ​ 
   
4. Select "Tools" 
5. A drop-down will appear. Click on “Share my file with  Agent”. This will generate a message that a diagnostic copy will be created.
6. When the token is generated, be prepared to type in your notes or in a message (unable to copy and paste) 
7. Click “OK”.  The tax file will then be sanitized and sent to us. This action will generate a Token Number  
8. Please respond directly to this message and provide the Token Number that was generated.  

TurboTax Desktop  

1. Open your return. ​ 
2. Click “Online” and select "Send Tax File to Agent". ​ 
3. This will generate a message that a diagnostic copy will be created.
4. When the token is generated, be prepared to type in your notes or in a message (unable to copy and paste) 
5. Click “OK”. The tax file will then be sanitized and sent to us. This action will generate a Token Number  
6. Please respond directly to this message and provide the Token Number that was generated.  
   

Thank you for your time and patience as we look into this further. 

[LosRubios]

@GabiU I have sent the file - the token is nine one three zero three five two one seven nine four nine two nine three six dash zero one six three six nine nine six (sorry, but if I use digits, your AI screen thinks I am entering a phone number). 9130352179492936-01636996 (restored)

There was no ability to add a message with the file, it just provides the token in the desktop version I am using. The file I sent has the correct info for the Gross Distribution and RMD in the IRA section and then has the 25% penalty backed out by selecting the 'appeal the penalty option'.

I also checked my return in TurboTax desktop 2024 and this IRA Penalty issue wasn't present there.

[LosRubios]

Just to close the loop on this issue. After Gabi assisted in opening a support ticket and I submitted my turbotax tax files using the software, a support ticket was opened and I got an email from TurboTax support on Feb 12th stating that the issue had been fixed in the latest update to the TurboTax software. So if you are experiencing this issue, make sure you have the most up to date version of TurboTax.