Turbotax 2020 saying I owe taxes on RMD returned per CARE act

[psyadam]

Thinking there might be a bug in the Turbotax Home & Business. I entered my 1099 from TDAmeritrade with my 2020 Inherited IRA distribution, which I returned to TDA per rollover as instructed. Entered in Turbotax which told me I wouldn't have to pay taxes on this. And then entered tax owed in the red under the 'Federal Tax Due' section of the program.

Is there different way to enter this?

I was surprised TDAmeritrade even entered it in the 1099 as it was returned/rolled over, but assume that's just how it is recorded. Didn't receive a rollover notification from them (although never did a rollover before).

Thanks,

Adam

[dmertz · Accepted solution]

Because RMDs were waived for 2020, you must indicate to TurboTax that none of the distribution was RMD.  To correct this you must delete and reenter the 1099-R form.   Simply editing the 1099-R form in TurboTax and changing your answer to the RMD question will not work.

[psyadam]

Thank you so very much, I deleted and redownloaded the 1099 from TDA and checked not RMD and rollover and that deducted that amount from income and subsequent tax owed. Appreciate it.

Adam

[HSt]

The solution of changing the categoriztion from the original 1099R is a work-around but the IRS will do a matching of the 1099R and they will not match. Is there a better solution to properly handle the RMD on the return?

[dmertz]

The only aspect of this that may be considered to be a workaround is the need to delete and reenter the Form 1099-R if the question was originally answered as indicating that the distribution was an RMD.

Saying that the distribution was not an RMD is the correct and proper response, not a workaround.  Because RMDs were waived for 2020, even though the distribution was originally intended to be a RMD, it was not an RMD in the legal sense.  Saying that the distribution was an RMD is therefore a technically incorrect response except for cases where the distribution was to make up a missed RMD that was required to have been taken by the end of 2019 or earlier.  If the distribution was a make-up distribution for an RMD that was required to have been completed by the end of 2019, the distribution was not eligible for rollover.

Nowhere does a Form 1099-R say that the distribution(s) being reported on it are RMDs and nowhere does your tax return identify any distribution as being an RMD, so saying that the distribution was not an RMD cannot possibly result in any matching error at the IRS.

[dref50]

I read your answers but it doesn't cover the situation where it was only partially returned. We initially took an RMD in January for $3K and another in February for $13K, which was then returned to the IRA appropriately per CARES act instructions and timeframe. The $16K is shown in both box 1 and 2a, but only $3K is taxable. How do I do this in TurboTAx? 

[dref50]

Sorry, I didn't get through all of the questions in TT so it did allow me to input the required information to only include $3K as the taxable portion of the IRA distributions.

[bronco34]

This recommendation worked.  Thanks!

[rhmny1]

Yes Yes Yes.  Your suggestion works.  But I must say to TurboTax -- You have got to do a better job in dealing with this question.  I suspect that quite a few people gave back all or a portion of their RMD after the CARES act passed.  I spent way too much time in dealing with this issue!

[mikep1300]

Agree...actually TurboTax is MISLEADING, because it says saying that it is "uncommon" for the distribution not to be RMD.  For 2020, however, it should be saying the opposite, or have a popup with the explanation that's in this thread.  I fortunately only wasted about 15 minutes until finding the answer in this thread.

[GregoryU]

I agree that claiming the 1099-R distribution is not an RMD in TurboTax is a workaround.  If a 1099-R is issued, the provider is reporting a taxable RMD was taken (per box 2a), so the tax return (when filed) will be inconsistent with the 1099-R and an flag could result.  If the 1099-R is entered in TT as received, there is a follow-up screen asking if the distribution was subsequently moved to another retirement account or returned to the same retirement account (a rollover if the account holder did it, or a transfer if the institution did it).  Click yes, and the following screen says that no tax is owed on the distribution.  However, the tax already taken in TT for the distribution is not backed out.  I suspect it's a software bug that will eventually be corrected.

[dmertz]

The 'R' in 'RMD' is for the word 'required.'  Calling a distribution that is not required an RMD is a misnomer.

Where TurboTax asks if the distribution was an RMD, read the question as asking if this distribution was a required distribution.

[Elra4569]

You can say you "rolled over" the entire amount if you repaid it.  Then it will ask questions that will lead you to the answer "you do not have to pay taxes" on the amount you repaid.

[mikep1300]

Don't be tricked by that.  You've already been assessed the tax a few steps earlier, and although it says you don't owe, there's no recalculation to remove the tax.  (See similar comments above)

[Retiredguy01]

I suspect we will all be overtaxed unless TT addresses this issue...the opposite of what the Cares act intended.

But I continue to review the threads for a solution.