RMD as income when distributed to IRA

Forum|Forum|6 years ago
April 17, 2020
1 reply
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1099-R - My RMD was distributed in entirety to IRA.

1099-R as received and entered in Turbo Tax reads:

Box 1 and 2a same amount.

2b was checked Taxable amount not determined.

Box 4 Federal Tax was withheld.

Box 7 Distribution code is 7 with IRA/SEP/SIMPLE box checked.

Why is the entire RMD amount showing up as income when it was put into an IRA? Am I entering something wrong? Is the 1099-R correct?

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fanfare

Level 15

because they are two separate events.

If you made an IRA contribution then you need to be eligible for that contribution., otherwise you have an excess contribution.

You can't rollover RMD amounts

Record your contribution under "Deductions"

dmertz

Level 15

Unless the distribution of the RMD in 2019 was a distribution from an inherited account, the individual was age 70½ or over in 2019 and ineligible to contribute to a traditional IRA for 2019. A contribution to a Roth IRA is permitted at any age, but any IRA contribution requires having compensation to support the contribution.

dmertz

Level 15

@dmertz

Individual was over 70 1/2 in 2019. Investment firm was aware of that. I will need to check with them why they did this. The "compensation" in this case was the RMD.

Now the IRA exists, will there be penalties involved?

An RMD is not compensation.

You said, " IRA Simple." Do you mean a SIMPLE-IRA contribution from net earnings from self employment? Contributions to a self-employed retirement plan are not age-limited.

If there is compensation (generally income reported in box 1 of a W-2 minus any amount in box 11 or net profit from self-employment) and the contribution was a regular traditional IRA contribution, not a self-employed retirement contribution, a regular traditional IRA contribution can be recharacterized to be a Roth IRA contribution instead. Otherwise, it will be necessary to obtain a return of contribution before the due date of the 2019 tax return, including extensions.