Is there an error in TurboTax when calculating taxable income from a covid-19 retirement distribution?

[icky0]

No, TurboTax does NOT think I want 100% of the distribution to count in 2020. But hypothetically, if it did, then it would say my taxable income for the distribution is $20,000, since I made a $10,000 repayment. And yet it says the full $30,000 is taxable this year.

[fanfare]

(30,000 / 3 )  - 10,000 repaid is taxable amount of zero.

In hearings on the Post Office yesterday , a congressman said he wouldn't mail bill payments anymore because he can't trust the Post Office to deliver.

Base on the forum this year, I can't trust TurboTax to deliver either.

[DawnC]

@fanfare - only 100K can apply to covid, so on your net 119,500 distribution, 19,500 is taxable as is one-third of the CRD of 100K - total taxable 52,833.

@icky0 There is something afoul with the amount on line 5b, and it is being addressed.    I am guessing you have already deleted the entry and re-entered it?    And you have the 10K repayment entered not as a rollover, but in the disaster follow-up questions?

[fanfare]

@DawnC 

If I enter 1099-R as received box 2a zero, taxable not determined,
TurboTax says my tax is zero.
If I enter 1099-R with 165552 in box 2a, taxable amount not determined.
I get a taxable amount of 79,552.

which is 165,552 - 43,000 - 43,000

[icky0]

@DawnCyes, I have deleted my 1099-R and recreated it multiple times, using both manual entry and download from my financial institution. I get the same wrong value for line 5b every time no matter how I do it.

[macuser_22]

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@icky0 wrote:

@DawnCyes, I have deleted my 1099-R and recreated it multiple times, using both manual entry and download from my financial institution. I get the same wrong value for line 5b every time no matter how I do it.

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Since you repaid 1/3 in 2020 then there is not 2020 taxable amount.

OK - here is the entire sequence when I do it in the online version  - what are you doing that is different?

[DawnC]

I think it is fair to say that there is an issue here.   I don't get all the questions on the ''Let's see if we can exempt the tax'' and when I get the screen the says ''Your distribution is 0 and your tax is 0'' - it is not reporting the correct amount on 5b.   I have reported it as a separate issue and will wait and see what happens.    Thank you all for the info!  

[macuser_22]

@icky0  Did you check the box on this screen that would make it taxable in 2020 rather than delaying the tax to 2021 and 2022?

[icky0]

@macuser_22

Bingo. My form 1099-R has a blank box 2a and box 2b is checked that taxable amount could not be determined. When I put $30,000 in box 2a and uncheck 2b, TurboTax correctly calculates that none of the distribution is taxable income for 2020. This tells me that the calculation only works if the financial institution managing my retirement has an entry in box 2a and unchecked 2b. TurboTax cannot properly handle the scenario where a taxable amount was not reported on 1099-R.

Glad I caught the error. When TurboTax calculates correctly I get a $3000 refund. When TurboTax calculates wrong I owe $9000.

[DawnC]

When I got the screen that said you reported $0 distribution but only have to pay tax of 1/3 of $0,  which sounded good; I didn't check the box but 5b showed 30K.   But when I deleted it and re-entered it, 5b shows $20K if I choose to pay it all in 2020 and $0 if I spread it, which is right.   But it properly tells me I have a 30K distribution too.   @icky0 - does your screen say 'You reported a $0 distribution when you choose to pay it all in 2020 and if you choose to spread the tax?   Does it change if you click the box to pay it all in 2020?   

[macuser_22]

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@icky0 wrote:

@macuser_22

Bingo. My form 1099-R has a blank box 2a and box 2b is checked that taxable amount could not be determined. When I put $30,000 in box 2a and uncheck 2b, TurboTax correctly calculates that none of the distribution is taxable income for 2020. This tells me that the calculation only works if the financial institution managing my retirement has an entry in box 2a and unchecked 2b. TurboTax cannot properly handle the scenario where a taxable amount was not reported on 1099-R.

Glad I caught the error. When TurboTax calculates correctly I get a $3000 refund. When TurboTax calculates wrong I owe $9000.

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A blank 2a and not determined checked means the plan administrator could not determine the taxable amount.     That usually indicates that either you have a non-taxable "basis" in the 401(k) that the administrator does not know about or it is a equal periodic payment.   Your "basis" that the plan administrator knows about should be in box 5.

If  you are receiving equal periodic payments (like monthly) from the 401(k) that turns it into pension treatment which is not eligible for the COVID exceptions.

Before changing the 1099-R you should talk to the plan administrator and find out why the box 2b (not determined) is checked for a 401(K) distribution.      If incorrect then they must issue a corrected 1099-R.

You cannot change it since the IRS receives a copy form the plan administrator and what you report must match.

[icky0]

@DawnC 

When I enter my 1099-R the way it was sent by my financial institution, with box 2a blank and box 2b checked, the final screen says that I reported a distribution of $0 but only have to pay taxes on 1/3 of it ($0).

If I change my 1099-R to match the way @macuser_22 has it, the final screen says that I reported a distribution of $30,000 but only have to pay taxes on 1/3 of it.

This is a serious error in TurboTax that almost cost me $12,000.

[macuser_22]

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@icky0 wrote:

@DawnC 

When I enter my 1099-R the way it was sent by my financial institution, with $30,000 entered in box 2a and box 2b checked, the final screen says that I reported a distribution of $0 but only have to pay taxes on 1/3 of it ($0).

If I change my 1099-R to match the way @macuser_22 has it, the final screen says that I reported a distribution of $30,000 but only have to pay taxes on 1/3 of it.

This is a serious error in TurboTax that almost cost me $12,000.

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As I said above ask the plan administrator why the taxable amount is not in box 2a as it should be for a 401(k) distribution.   This is probably NOT a TurboTax issue.

[DawnC]

Yes, the empty 2b and the checked 'taxable amount undetermined' not going to allow the tax relief.   When I entered a new distribution like that, I get the ''You reported $0 as a CRD'' message.  So, find out why they reported it on the 1099-R like that and get a corrected form if it is not correct.   Thank you both!  

[fanfare]

@DawnC 

please consider my example again from above where I stated

"I get a taxable amount of 79,552.

which is 165,552 - 43,000 - 43,000"

First, I did have the election to pay it all in one year checked off, which I found by stepping through again.

However, there are two places to enter the "rolled over amount" aka "paid back amount".

I can deduce that TurboTax is putting 43,000 on Line 18 of Form 8915-E.

Is that a permissible entry on Line 18 ??

Whoop-de-doo. Today is a new day and it is doing it differently now !

It says my taxable amount is 22,552 because the 43,000 repayment is covering my 1/3 of 100,000.

That makes more sense. Is that correct ??

(one might say it is counting the 43,000 twice.)