Took 2020 RMD before RMD's for 2020 waived. Repaid RMD. Answered TTax questions and Box B1 on worksheet checked but RMD amount still shows as income on my 1040. Why?

[Richard100]

TTAX asks the right questions but still shows the RMD amount that was repaid back into same account as income.  Why?

[DawnC · Accepted solution]

Since RMDs were waived for 2020, no part of the distribution was actually an RMD even though it was taken with the intention of satisfying an RMD.  In TurboTax, indicate that the distribution was not an RMD.  Indicate that you moved the money to another retirement account (or returned it to the same account), then indicate how much of the distribution you returned to the IRA.  TurboTax will include the entire gross amount on Form 1040 line 4a but exclude the amount rolled over from the amount on line 4b.  TurboTax will also include the word ROLLOVER next to the line.

If you did not substitute other funds for the amount withheld for taxes so as to complete the rollover of the entire gross amount of the distribution, the amount of the withholding remains distributed, not rolled over, and subject to tax; it's too late to complete a rollover of that portion of the distribution.  If the overall tax liability determined on your tax return is less than your total withholding, including the amount withheld from the IRA distribution, you'll get a tax refund.

[fuadada]

I downloaded 2020 turbotax today morning and completed all requirements but it was keep asking me about my RMD value for IRA & 401K plans......means Turbotax is not updated to includes CARES Act requirements in accordance with IRS notice 2020-51.  Requested to update Turbotax as soon as possible 

[macuser_22]

---

@fuadada wrote:

I downloaded 2020 turbotax today morning and completed all requirements but it was keep asking me about my RMD value for IRA & 401K plans......means Turbotax is not updated to includes CARES Act requirements in accordance with IRS notice 2020-51.  Requested to update Turbotax as soon as possible 

---

Since there was NO RMD requirement for IRA's and 401 type plans, yu must answer the RMD question by choosing "NONE of this distribution was a RMD" because it was not.   Then it will go to the screen for rollovers.

[jrlrph]

I took a RMD in late March of 2020.  I returned the full amount the first of April.  I then rolled over to a ROTH account a much larger amount.  I received a1099-R from Fidelity for the total amount of both transactions.  Turbo-Tax had a screen which allowed me to enter both of these transactions exactly as I did.  It identified the exact amount I rolled back to the original IRA account and the exact amount that I transferred to the ROTH account.  It looked GREAT!  The next screen had the following statement, "Select CONTINUE and we'll delete the entry you've started and take you back to enter two separate1099-Rs, one for the rollover and one for the conversion.  Why ask me the great questions on the previous page if you are going to delete the information I just entered, and create two new 1099-R's that will no longer agree with what Fidelity is sending them.  The IRS receiving different information from me and Fidelity is what has led to me being audited in the past.  Addendum:  I decided to not hit the "continue" button and then go to my 1040 and see what the program did.  It worked perfectly;  I had a QCD in my account and the rollover in my wife's account.  It created a statement sheet and printed the letters "STMT" next to line 4A and printed a document that perfectly identified the rollover amount and the QCD amount.

[dirlink]

Ok, I tried the method in this post.  Did not work.

Checked to make sure my version of TurboTax was updated, it is.

I entered the 1099R manually instead of importing it.  Put the amounts in as listed on the form from my broker, box 1 and box 2a amounts were the same as the full amount of the RMD.  Checked box 2a as "taxable amounts not determined".  Box 7 code was 4 (Death), checked the "IRA/SEP/SIMPLE" box, no other entries from the form.

The tax due amount increased significantly.

Next screen I said the IRA was inherited, told TT that it was from someone else (my dad), and the year they passed away (2017).

Next screen told TT that Dad did not have any non-deductible IRA contribution

Next screen told TT that dad was born before 7/1/48

Next screen asks the question "Was this withdrawal an RMD?".  The instructions say "If you took your RMD and later rolled it back into your account under the CARES Act, answer "NO" here."  So I answered "No".

Next screen asks if the distribution was "due to COVID or a Qualified Distaster Distribution."  I answered "NO"

Next Screen showed I had entered the 1099R and asked if I wanted to add another one, I clicked continue.

Next screen asks "Did you take any Distaster Distributions in prior years or repay any prior year Disaster Distributions in 2020".  I answered "NO".

Next screen asks "Tell us more about this Retirement Plan distribution".  I answered "I was not required to take an RMD for 2020".

The increased tax due amount did not change.

The RMD was fully repaid in 2020 on July 2.

My brokerage says they will not send out Form 5498 until May showing the repayment.  

How do I get TurboTax to refigure my taxes due based on the repayment?

I do not want to pay the IRS a large overpayment and then try to claw it back later, thanks.

[ThomasM125]

You will see a screen that says What Did You Do With The Money From This Payer? and one of the options is I moved the money to another retirement account (or returned it to the same retirement account.) You need to check those boxes to have it not be taxable.

[dirlink]

That question did not appear in the dialog.  I was never asked what I did with the money.

[dirlink]

I just deleted the 1099R, let TurboTax reimport from my brokerage.

Program hardly asked me any questions at all, accepted the RMD amount and increased my taxes due by several thousand dollars.

Please, I need step by step instructions on how to get this entered correctly so that I do not send in an error ridden tax return showing thousands of $$$ in taxes due when I do not owe any at all.

Do I need to start a new return?

[macuser_22]

---

@dirlink wrote:

I just deleted the 1099R, let TurboTax reimport from my brokerage.

Program hardly asked me any questions at all, accepted the RMD amount and increased my taxes due by several thousand dollars.

Please, I need step by step instructions on how to get this entered correctly so that I do not send in an error ridden tax return showing thousands of $$$ in taxes due when I do not owe any at all.

Do I need to start a new return?

---

Delete the 1099-R and re-enter MANUALLY.

Answer the RMD question that "None of this distribution was a RMD" or RMD not required".   The you should get the "Moved money" question - answer YES.

[dirlink]

I hate to say it, but that didn't work either. 

This is my screen by screen procedure used to enter the 1099R again:

1. I deleted the 1099R
2. Re-entered it manually, entered the gross distribution value, same amount as the taxable amount, checked box 2b "Taxable amount not determined", entered box 7 value of 4 (Death) as this is an inherited IRA, checked the box "IRA/SEP/SIMPLE", pressed the CONTINUE button
3. Next screen discusses "Did you inherit the IRA from (Your Broker Name)"; answered "yes" and "From someone else who passed away"; then entered dad's name and the year he passed away (2017) which TurboTax had already populated from before; then pressed CONTINUE
4. Next screen asks "Tell us a little more about this inherited IRA"; it asks about non-deductible IRA contributions; I answered "I don't know", then pressed CONTINUE
5. Next screen wanted to know when dad was born; I selected "before July 1, 1948" then pressed CONTINUE
6. Next screen is entitled "About this inherited retirement account"; asks "Was this withdrawal an RMD?", I answered No, then pressed CONTINUE
7. Next screen is entitled "Was this withdrawal due to COVID-19 or a Qualified Disaster Distribution?"; I answered "NO", then pressed continue
8. Next screen shows the entered 1099R so you can add, edit or delete forms, I pressed CONTINUE
9. next screen asks "Did you take any disaster distributions in prior years or repay any prior year disaster distributions in 2020"; I answered "NO"; then pressed CONTINUE
10. Next screen is entitled "Tell us more about this Retirement Plan Distribution"; there are 3 choices for answers:  "I received all the RMD for 2020" or "I did not receive all the RMD for 2020" or "I was not required to take an RMD for 2020"; I selected the 3rd choice and pressed CONTINUE.
11. The next screen goes back to the Federal Taxes/Wage and Income sections screen where you can see everyhting from this year and last year.

Please help me, the procedure you guys describe is not working for me, the questions do not come up.

I even started a fresh return to see if it would work, and it doesn't.

I am using a PC based application of TurboTax.  Version number shows as 020.000.1628.

Please help me, thanks.

[dirlink]

Well, apparently the version number looked like a phone number, so let me try again without the . between all the numbers:

020.

000.

1628

[macuser_22]

OK - I see the problem.   With a code 4, the only purpose of the "Inherited IRA" question  is to PREVENT rollovers that normally are not allowed.   You must answer NO to that question  in order to bypass the block and get the rollover question.

Your step #3 answer must be no.

[dirlink]

MANY Thanks, that worked.

[stockjohn]

This was the answer I was looking for.  Thank  you.  However, the program should have had this information instead of making us search for it.