2024 RMD Excess Accumulation Worksheet Problem - TTax Deluxe

[domerdoc]

There is no requirement to file Form 5329 unless you didn't meet the requirement.  So you could enter any amount into the TT RMD question and as long as your 1099 distribution was higher than that amount, then TT does not generate 5329.  The entries you make into the RMD question do not enter into your tax return at all.  I have most investments in an IRA that I take no distributions from, so no 1099 is generated.  I transfer funds from that IRA into others, then take distributions for which 1099s are generated.  I enter the 1099s into TT with the correct Box amounts, but then enter a "calculated" RMD amount into the RMD question which is lower than the reported distribution.  So 5329 is not generated.  If you wanted, you could enter the same distributed amount into the RMD question but you might run into the "rounding error" that was reported here earlier.  At the end of the TT section of 1099s in Step-by Step, there is a question of "did your fail to meet the RMD", and you simply answer "no" then you're done.  IRS could potentially receive institution reports of account balances to check RMD, but I'm not aware of any routine reconcilation with the actual returns.  In essence, you do not have to report your total calculated RMD amount on the return anywhere.  Just record the 1099s as they appear.  TT only asks this question to prompt you to go to 5329 if you didn't make the RMD needed.  If you did make your RMD, then 5329 is not needed.  There is no IRS requirement that you justify this using TT.  Shame on TT for not providing the correct guidance on this. 

[danasmith474]

Thank you for the answer.  The issue is though why when I enter the total distribution as Mr RMD does it apply a 25% penalty?   Does not seem right.   And that’s in addition to the 22% I am paying in taxes.  

[DianeW777]

If you would like to send us a “diagnostic” file that has your “numbers” but not your personal information it would help.  If you would like to do this, here are the instructions:  (Don't forget to give us the state)

TurboTax Online:

Open your return -Go to the menu panel on the left side of your return and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number and your state. This will allow us to open a copy of your return without seeing any personal information.  

TurboTax Desktop:

If you like, you can send a copy of your return that will be scrubbed to eliminate your personal data by using these steps:

1. Click on Online in the top left menu of TurboTax CD/Download for Windows
2. Select 'Send Tax File to Agent'
3. Write down or send an image of your token number and state then place in this issue.
4. We can then review your exact scenario for a solution.
5. Please also tell us any states included in the return. This is necessary for us to view the return.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution. 

@danasmith474 

[cjuhlman]

This is simple enough to reproduce. 

1.  Take 2 separate IRAs, "a" with an RMD of $25,000, and "b" with an RMD of $20,000.

2.  Actual withdrawn from a was $15,000

3.  Actual withdrawn from b was $30,000

This is acceptable to the IRS since the total withdrawals >= the total calculated amount that needed to be taken.

When entering the 1099-R info for IRA "a", TT asks for the RMD amount.  Upon entering the actual calculated RMD for "a", TT immediately generates the penalty.  It doesn't seem to matter if I enter the 1099-R data for IRA "b" first which would indicate $10,000 more withdrawn than required, as soon as it sees the shortage for IRA "a", it slams the penalty on.

I got around this issue by entering the RMD amount to be the exact amount that was withdrawn instead of the calculated amount.

[jaygourley]

Weeks ago, I thought this would be corrected quickly.  Now, we're getting close to filing deadline, and TurboTax still cannot correctly calculate federal tax payments for anyone who takes an IRA required minimum distribution in distributions other than the exact amount calculated by separate IRA accounts.  There are bound to be naive taxpayers who have already paid taxes they didn't owe as a result of this error that TurboTax seems determined not to fix.  I think the problem has been known for months.

[domerdoc]

Yes Cjuhlman, this is a simple work around.  None of it actually goes into your tax return, only the distribution you received that matches up with the 1099R report that the IRS receives to match up with.

Does anyone in community know of someone who didn't meet RMD in prior years (before TT triggered the penalty form) and who's return trigger an IRS inquiry?  Even if they might have the capability, I doubt that they actually could follow up on it - my suspicion is that we're on the honor system, until someone gets caught for another reason.  I have IRAs that I don't take distributions from (but make up elsewhere), but I'm not awar the IRS receives any end-of-year values from the institutions.

[DaveF1006]

It depends. While the IRS may not have recognized that an RMD wasn't taken in previous years, a routine audit could change all this.  Also, with the advent of AI and improved technology, the likelihood becomes even greater that these missed payments could be detected at some point.

Financial institutions are required to report the year-end fair market value of your IRAs to the IRS using Form 5498. This form includes details about the year-end account balance, which is the basis for calculating your RMD for the following year. While the IRS does get this information, it's true that enforcement of RMD compliance may rely on tax returns or audits rather than proactive monitoring.

If an RMD is missed or not fully taken, the IRS imposes a steep penalty—50% of the amount not withdrawn. That said, you can request a waiver of the penalty if you can show reasonable cause for the shortfall and corrective action was taken promptly.

@domerdoc 

[dmertz]

While Form 5498 reports the year-end value to the IRS, a copy of that form is not required to be supplied to the accountholder unless there were some sort of contribution, rollover or Roth conversion required to be shown on the form.  Otherwise the year-end statement from the financial institution will provide the accountholder with the year-end value.

The SECURE 2.0 Act reduced the excess-accumulation to 25%, or, if the RMD is completed within the correction window, 10%.  It's this change to the tax code that has caused the change to Form 5329 that the TurboTax developers implemented so poorly in the earlier versions of 2024 TurboTax.  I think that today's update has delivered additional changes to TurboTax to improve that situation.