Reporting RMD on inherited Roth IRA

[KASinOR]

I am going through smart check on Turbotax, having entered in all my tax information.  I get a screen that is saying "Check This Entry.  Form 1099-R (CHARLES SCHWAB & CO,INC): RMD amount should have an amount since this IRA is inherited.  If there was no RMD for this account, enter 0 for the amount."  

First, I received three separate 1099-Rs from Charles Schwab so I am unsure which 1099-R it is referring to, but perhaps I can assume that it is one or both the the 1099-R forms for the two Roth IRA accounts I inherited from my mother in 2012.  I did receive an RMD from each of those accounts this past year.  But when I enter the amount of both of the RMDs (approximately $5,400) , my tax bill goes up by $1,363.  I thought that there was no tax on inherited Roth IRAs ?    Why am I getting such a huge tax liability?  Is it a problem with Turbotax? 

[ReneV4]

To correct the tax liability, you will need to complete specific "Inherited" and "Roth" sections to show that the distribution is non-taxable.

First,

1. Review your Form 1099-R from Charles Schwab, checking Box 2a to ensure it is zero
2. Next, check Box 7 for the distribution Code Q or Code T
3. If it is Code Q, TurboTax should automatically know it's tax free
4. If it is Code T, TurboTax will ask you follow-up questions related to the 5-Year Rule before it removes the tax

Next, 

1. Return to your 1099-R entry by clicking Review to the right of IRA, 401(k), Pension Plan Withdrawals (1099-R) in the Federal Wages & Income
2. Click on the pencil to the right of the 1099-R
3. Click Continue through the entries you've made
4. Ensure you selected, I inherited this IRA, and that you have identified it as a Roth IRA, then Continue
5. Ensure you answer Yes when asked if the Roth IRA was opened before 2021, Continue
6. Next, "Let's get more information about your RMD", enter the distribution amount pertaining to the RMD, Continue
7. Next, select, Some of the distribution applied to the December 31, 2025 RMD (and enter the RMD amount), Continue
8. Next, in the Review your 1099-R summary, Continue (not the pencil)
9. Continue answering the questions
10. Next, when you see "Let's go over any required minimum distributions (RMD), select Continue (not the pencil)

[KASinOR]

Hello there ReneV4,  Very much appreciate your step by step instructions.  To report back on my attempts to apply them: 

1)  Checked both 1099-R forms for my two inherited IRA accounts, and Box 2a is blank on both, and both have the code Q in box 7.   These forms (as well as the other 1099-R that I received from Schwab) were both imported into Turbotax and so the information was  automatically populated. 

2)  When I review the 1099-R information for each of those entry (by clicking on the pencil to edit) I have indicated that they are both Roth IRAs, that they were inherited, and then it asked me for the name of the person I inherited it from, and  I entered the name of my mother and the year of her death (2012).

3) However, beyond that, there were no questions asking if the Roth was opened before 2021, nor was there any screen saying "Let's get more information about your RMD" or any place to list the amount of the RMD.  Therefore, I was not able to go beyond step 5 of your instructions.  So did I miss something?   

[KASinOR]

Hello @ReneV4 , I was still hoping that you -- or another expert at Turbotax -- could respond to my reply from a few days ago about the fact that I was not able to fully implement your instructions, because my TT program does not go beyond step 5 in your instructions, and does not ask me any questions about the RMD.  It simply asks me to check the box to indicate it was inherited Roth IRA, and then asks for my mother's name and the year of her death.   It does not track with your descriptions of the screens that are supposed to follow that question. I am not sure how to proceed.  Thank you for any help you can provide. 

[ReneV4]

Since you have attempted to make the revisions and are still not triggering the additional questions, I recommend that you manually delete each of the Form 1099-Rs that you uploaded and were automatically populated because there appears to be something that is now causing them to retain prior, incorrect information.

To delete each Form 1099-R, do the following:

1. On the left panel, click on Tax Tools, then the down arrow to open more options
2. You may have to scroll down a little to view the Tools option below
3. Click on Tools, then Delete a form (Usually the third option down)
4. Scroll down to delete each of the Form 1099-Rs

After you have deleted each Form 1099-R, go back and re-enter them manually.

If that does not resolve the issue, I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

TurboTax Online:

1. Sign into your online account.
2. Locate the Tax Tools on the left-hand side of the screen.
3. A drop-down will appear. Select Tools
4. On the pop-up screen, click on “Share my file with agent.”
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

1. Open your return.
2. Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” *
3. This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.
4. Please provide the Token Number  (including the dash) that was generated in the response.

*(If using a MAC, go to the menu at the top of the screen, select Help, then, “Send Tax File to Agent”) 

[KASinOR]

Dear  @ReneV4, 

Thank you kindly once again for your assistance.  I followed your directons and I manually inserted the information from all three of my 1099-Rs into Turbotax, and I had the very same result.  There were no additional questions generated asking me about the RMD, and I ran into the very same question in Smart Check asking me to insert a RMD and taxable amounts. 

The token number generated when I instructed Turbotax to send the file to agent was: 

[removed]-72271229

I look forward to hearing back from you.   

[RogerD1]

Thanks for providing the token.  I was able to review your entries for the 1099-R forms and I didn't find any fault with your entries.  The only error that showed up in the review of the forms was that no taxable amount was entered on one of the Roth IRA forms, but I entered a 0 for that and the error went away.  You'll need to do that on your end as well.  There is also a question about Foreign trusts that needs to be answered also - taking care of these two items will clear any errors.

It does appear that one of the 1099-R forms was for a Roth conversion that you had made last year.  The amount of this is correctly showing up on line 4b of your return as taxable income.  The total of all of the 1099-R forms is showing up in line 4a as the total distributions from the IRA.

As for Federal tax liability, your return is showing that you have a $0 tax liability for Federal and it is correct based on the entries that you have made.

[KASinOR]

Very much appreciated @RogerD1 .  It will be great to get my taxes off my plate (especially since I owe nothing this year).