1099-R from TSP for Death Benefit/Direct Rollover (4G) showing as a fully taxable event in TurboTax

[joelcarey23070]

I received a death benefit from my Mother's TSP and did a direct rollover via my Schwab account to create an inherited IRA during 2021.  The check went directly to Schwab, establishing the inherited IRA.  When entering the Thrift Savings Plan 1099-R into TurboTax, the total distribution block in 2b is checked, and block 7 shows 4 (death) and G (Direct rollover).  

My question is:  Why is TurboTax showing the entire amount of the TSP distribution (that was a direct rollover to an Inherited IRA)  as all taxable this year?  The only taxes that should be paid are when I am receiving a distribution from the inherited IRA, within the period I have to take the distributions.

[RaifH · Accepted solution]

You are correct, this is not a taxable transaction. Make sure that both distribution codes are being reported in TurboTax. If you imported the form, check manually to make sure both code 4 and code G are in there. When entering Form 1099-R, under box 7, select the box I have more than one value in Box 7. Put 4 as the distribution code in one, G in the other.  

Once you verify that you did not convert this to a Roth, the entire rollover will not be taxable. 

[dmertz]

Also make sure that the Form 1099-R has a zero in box 2a, otherwise the TSP is reporting that it's a taxable rollover to an inherited Roth IRA (which is one of the options on the TSP-81 form).

[joelcarey23070]

Thanks.  All good now.