RMD taken correctly, but penalty assessed

[arusso03]

I have 2 IRAs.  I took my full required RMD (approx. $15K) from my first IRA; and I took more than my full required RMD from my second IRA (the account had only $17 so I took the full amt and closed out the account).  I completed my return on TT Premium about 10 days ago and all looked good (taxes calculated correctly) but I didn't submit to IRS.  I signed in today to find that my taxes owed had INCREASED by over $3K!  I noticed that TT had assessed an RMD penalty!  The questions changed and it now asks what I took for my RMD and if this was my full required RMD, to which I answered "yes" (for both IRAs), but then it proceeds to ask me questions about a "correction window" and then assesses a penalty.  THIS IS INCORRECT: I took my full RMD as required for both accounts, and TT was calculating all of this correctly 10 days ago.  WHAT HAPPENED??!! The only way to get TT to calculate the correct tax is to say that my required RMD was $0, which is incorrect, and I don't want to submit incorrect backup pages even though my tax liability would be accurate.  HELP PLEASE! I am using TT PREMIUM through Fidelity Investments.

[SPQ]

I had the same unpleasant surprise, and posted an inquiry yesterday asking how to fix this problem.  More than 36 hours later I still have no response from TT.

[fanfare]

accoring to one taxpayer the recent update changed the RMD interview to correct problems.

Perhaps there are new issues with that "solution".

@SPQ 

@arusso03 

[arusso03]

Yes - that's clearly what must have happened (a "fix" to another RMD issue produced a new problem). 

No response or update yet from TT.  This is such an obvious error, you'd think they would be able to sort it out quickly.

[TerriLa]

Having the same problem.  It is saying I owe a 10% penalty on my RMD.  Somehow, the newest update, by following the questions, is adding my RMD twice and penalizing me on the extra amount.  They need to get this fixed ASAP.

[arusso03]

I believe the issue has been corrected.  I posted the original post but went back online on Thursday (Feb 27) and it was now showing the correct taxes owed (no penalty).   I revisited the RMD section and answered the questions again and all looked good — so fingers crossed. 

[TerriLa]

Hasn’t been fixed for me.  I just opened mine today to double check everything.  Had an update and that is when mine messed up.  I filled in the info from my 1099.  The gross distribution is my full RMD.  But it is charging me a 10% penalty on the same amount.  It doubled my RMD and says I only took out half.  I called Turbo Tax.  Was on the phone for quite some time.  Finally he said he was sending it to IT because it has to be a software problem.

[arusso03]

That is so frustrating. That’s exactly what had happened to me, yet it was fixed on mine after almost a week. I assume you signed out and then signed in to refresh. 
I’m very disappointed in Turbo Tax this year - this is not a complicated problem to address  

[TerriLa]

It is very frustrating.  I did sign out and back in, twice.  Nothing changed.

[TerriLa]

It is very frustrating.  I did sign out and back in, twice.  Nothing changed.

[arusso03]

I would go and re-do the RMD-related area (1099-Rs) and answer all the questions again (if you haven't already done that). When mine was messed up, it kept coming back with a question about whether I took the remaining RMD within a certain "window" (this was completely irrelevant because I had satisfied my entire RMD so there was nothing further to take), and that's when it would assess the 25% penalty.   When it seemed to have been corrected, and when I worked on that section again, it no longer asked that question - it only asked me what my RMD was and exactly how much RMD I had taken.  It then recognized it as the correct amount and did not assess the penalty.  I don't understand what's going on with yours.  If they don't get it corrected for you in a couple weeks' time, maybe you should switch to another tax prep service. 

[DanaB27]

If you cannot get it to work then please try to delete the Form 1099-R entries and reenter them. If you are using TurboTax Online delete your cookies and clear you cache before entering the Form 1099-R again.

Please follow these steps in TurboTax Online:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R” and enter your 1099-R
4. Continue until "How much of the $XXXXX was a RMD?" screen and select "Only part of this distribution was a RMD" and enter the amount of RMD /or select "The entire distribution was an RMD" (if this distribution includes RMD for other IRA accounts then you included the amount here)
5. Enter the RMD amount for this account on the "Let's get more information about your Required Minimum Distribution (RMD)" screen
6. On the "Review your 1099-R info" screen click "Continue"
7. On the "Did You Miss a Required Distribution From Any Retirement Accounts?" screen select "None of these plans failed to withdraw the RMD". If you had one IRA where you didn't take the RMD but took it from your other IRAs then select "An IRA..."
8. On the "Total RMD for all other IRAs" screen enter the RMD from your other IRAs (where you didn't take a distribution from).

In TurboTax Desktop:

1. Click on "Search" on the top right and type “1099-R”
2. Click on “Jump to 1099-R” and enter your 1099-R
3. On the "Required Minimum Distribution" screen enter RMD for this account 
4. On the "How much of This Distribution Applied to your December 31, 2024 RMD" select "Some of this distribution…" and enter the RMD amount / or select "The entire distribution applied…"  (if this distribution includes RMD for other IRA accounts then you included the amount here)
5. On the "Your 1099-R Entries" screen click "Continue"
6. On the "Did You Miss a Required Distribution From Any Retirement Accounts?" screen select "None of these plans failed to withdraw the RMD". If you had one IRA where you didn't take the RMD but took it from your other IRAs then select "An IRA..."
7. On the "Total RMD for all other IRAs" screen enter the RMD from your other IRAs (where you didn't take a distribution from).

Please try workarounds from dmertz:

For code 7D, omit the code 7 and enter only the code D.

For code 4D, indicate that the decedent died after December 31, 1951.

[Edited 3/10/2025 | 6:55am PST]

@TerriLa

[TerriLa]

I have deleted my 1099 R.  Twice.  Still does not work.  When I type in 4D for my distribution code I get these screens: 1) Let’s double check your info - is the IRA/SEP/Simple box checked?  Answer is No. 2) were you employed as a public safety officer?  Answer is No. 3) Tell us when this person was born. Answer is born before January 1, 1952. 4) was this distribution from a 403b plan.  The only answer choices are a) yes, this is a 403b plan or b) no, it’s another type of qualified retirement plan.  My plan is neither.  It is a non qualified annuity that I inherited four years ago.  I cannot answer this question truthfully because my plan is neither a 403 b nor a qualified retirement plan.  There are no other options to choose from. If I click on other qualified plan, then I am falsifying my form.  If I do click on other qualified plan, then it does take me to the RMD question.  I enter the RMD, which is the amount of my gross distribution.  Then it asks how much of the distribution applied to my December 31, 2024 RMD.  I answer choices of entire, some or none.  My gross distribution was my entire RMD.  But if I click on any of the three choices I get a screen asking me if I took out the remaining amount during the correction window.  The remaining amount that is shown is the same amount as my gross distribution.  And then it charges me a 10% penalty.  That is wrong.  I don’t have any remaining amount that is due.  At no point do I get a question asking if I missed a payment.  And I did not.

I paid over $70 for this program because I needed the business one.  I am getting really upset that this is not being fixed.  There are too many of us having the same issue with your program and we are getting the run around.

[TerriLa]

Here are my screens that still pop up every time I delete the 1099 and re enter it.  TT needs to get this fixed.  It should not be asking me if my distribution was from a 403 b or other qualified plan when I have entered a distribution code of D.  TT is about to lose a long-time user.

[MarilynG1]

Yes, this is an anomaly in TurboTax that is related to how the IRS treats retirement income reported on a 1099-R, which is that all retirement income is subject to RMD, and everything reported on a 1099-R is retirement income. 

You were correct to choose 'another type of qualified retirement plan' and enter the total distribution amount from Box 1 (or the taxable amount from Box 2a, if it's different)  as the RMD amount in order to complete your entry.  The funds are taxed the same way in either circumstance, and the 4D Code indicates that the amount is ineligible for rollover.

Here's detailed info from the IRS on Pensions and Annuities and more on Form 1099-R.

@TerriLa