RMD that was rolled over showing up as income on 1040

[Inthedesert]

I have entered the RMD I took in 2020 in Turbotax Deluxe, and also entered the information that it was rolled back into the account. The entire amount is showing up as taxable income on my Form 1040. I don't see anything amiss in the entries I have made.  Why is is showing up as taxable?

[SteamTrain]

Yeah, I see that too.

This may take some discussions with the CHAMPs and TTX experts and programming staff to figure out a)  whether that was intended, or b)  whether some additional text is required in the follow-up questions.....or c) whether that part hasn't been fully programmed in yet

With Online Premier

1)  I entered a supposed IRA RMD of 10,000

....then on the follow-up page indicated it was an RMD, and then

.......another page, that I rolled it all back.

..........then another page tells me it wasn't taxable since I sent it all back.

............. then I checked my preview 1040 display and the full 10,000 it shows up on line 4b.

2)  Edited that 1099-R same info BUT

......on the follow-up page that asks if it was an RMD, I indicate that none of it was..

.........then anther page were I indicate it was all rolled back..

...........another page again tells me it wasn't taxable  sine I rolled it back

............ then I checked my preview 1040 display and the 10,000 shows in 4a and a zero shows up on line 4b.

_____________________

SO, are we supposed to call it an RMD or not ?.    since RMDs were suspended...

........and why in procedure #1 above does the software tell me it's not being taxed since I rolled it back, then show it IS being taxed on the form 1040 preview. ?  Software for this section still in beta mode???

[dmertz]

Because RMDs were waived for 2020, no distribution made in 2020 is an RMD even though the distribution might have been originally intended to be an RMD.  Because TurboTax only permits amounts in excess of an RMD to be reported as rolled over, you must indicate to TurboTax that the none of the distribution was RMD.

In 2009 when RMDs were similarly waived, the developers changed 2009 TurboTax step-by-step mode to automatically indicate that none of the distribution was RMD.  It's likely that the developers will eventually do so again in 2020 TurboTax, but in the mean time you can produce the exact same result by explicitly indicating that none of the distribution was RMD.

[SteamTrain]

IF that's going to be the situation for 2020, I guess they could also leave the RMD choice line in that follow-up page, but not allow it to be selected,  with a parenthetical "( No RMDs required in 2020 ) "  after it so everyone understands why it's not selectable.

......but now  I wonder how the partial RMD selection line works...or doesn't work ? 

[dmertz]

When you indicate that part of the distribution was RMD, TurboTax subtracts from the the gross amount the amount that you indicate was RMD and then permits the remainder to be reported as rolled over.  The ONLY reason TurboTax asks this particular RMD question is to determine how much is eligible to be reported as having been rolled over.  TurboTax later separately asks if you completed all of the RMD for the year, which for 2020 the answer is yes.

[dmertz]

Note that the current version of TurboTax incorrectly tells you to answer Yes if you took your "RMD" (meaning a distribution that would have been an RMD were it not for the CARES Act).  Except for a distribute a missed RMD for a prior year, no distribution in 2020 is an RMD; you must answer No.

[SteamTrain]

Ahhh......yeah, a person who turned 70.5 in 2019 could have taken their first RMD in 2020, but before April.  So yeah, they still need that RMD question in there for any of those folks.

But for the others, I think they are trying to let them know what to do, but I think it mis-directs themnow.  This stuff is going to be immensly confusing as to what to select for millions of taxpayers. The "Online" software says:

_________________

"Because of a law change on March 27, 2020 as part of the CARES Act, required minimum distributions have been suspended for 2020 for certain accounts. If you still took your RMD, go ahead and let us know below."

_____________

To be perfectly clear, that last sentence needs to be quickly changed to something like:

"For those who turned 70.5 in 2020, or were older, you should select:  None of this withdrawal was an RMD." 

___________________

Except..DANG, that doesn't apply to pensions....or anything annutized?  Those are still RMDs no matter what the age.   SO now TTX needs to specify what accounts to say No to the RMD question?   Chaos !

"For those who turned 70.5 in 2020, or were older, you should select:  "None of this withdrawal was an RMD "     for the following types of distributions.................."      ??

[dmertz]

When I mentioned a missed RMD, I was not referring to an RMD for someone with a Required Beginning Date of April 1, 2020 since those RMDs were similarly waived.  I was referring to an RMD that was taken late, say, an RMD for 2018 taken in 2020 or an RMD for 2019 that was required to have been completed by December 31, 2019.

So your recommended text doesn't work for those who reached age 70½ in 2019.  I considered not even mentioning late-taken RMDs in my previous reply due to this potential confusion, but I couldn't just say that a distribution taken in 2020 is never to be treated as an RMD.

[SteamTrain]

I didn't realize those late 2019 ones were waived too...

I pity both the software folks trying to program it and make it clear...and the poor users/taxpayers for whom this is going to be immensely confusing as to what their actual choices must be to get them posted right.

[dmertz]

Delayed RMDs for those with an RBD of April 1, 2020 are not late RMDs.  Yes, it's confusing and probably impossible for developers to distill this down to a terse statement, but that won't prevent them from distilling it anyway, resulting in an inaccurate instruction.  Perhaps they should just ask if any of the distribution was ineligible for rollover, and of so, how much.  This is what these questions are actually trying to determine.  This wording would also cover in-service early distributions from qualified retirement plans that are hardship distributions that are ineligible for rollover, something that TurboTax has never addressed, but in that case would need to be asked for everyone, not just those who are potentially subject to age-based RMDs.