Under the CARES ACT, I returned my RMD in my IRA , technically a 2020 Rollover. But Turbo Tax is not allowing me to report the Federal Income tax withheld in Box 4 1099

[jtruta]

I am getting an ! mark under the money i reported in Box 4, and i am unable to continue my return due to the following quote from Turbo Tax " Federal tax shouldn't be greater an gross distribution in Box1" . So how can i proceed with my return?

[dmertz]

The amount in boxes 1 and 2a of the code 7 2020 Form 1099-R must be the amount that you originally took out of the IRA, including the tax withholding, not some lower amount.  They must not have any other value.  Some or all of the distribution is made nontaxable by how you report it on your tax return, not by how it is reported on the Form 1099-R.  To make the distribution entirely nontaxable you would have had to have substituted other funds for the amount withheld for taxes.

[macuser_22]

Most financial institutions will not send 1099-R forms until the end of January 2021 - you should wait for it before entering anything.     If returned after 60 days of the distribution under the CARES act, it will also go on a new 8915-E form that is still under development by the IRS and not available in TurboTax yet.

[dmertz]

macuser22 meant to say Form 8915-E.

If this distribution occurred before July 2, 2020, the regular rollover deadline was extended beyond 60 days to August 31, 2020 without it being a Coronavirus-Related Distribution that would otherwise have to be reported on Form 8915-E to be eligible to be able to roll it over beyond the 60-day deadline.

[fanfare]

TurboTax will allow you to report the Federal Income tax withheld in Box 4, as a distribution not rolled over.

[jwdbond]

This is correct interpretation of the IRS rules, but Turbotax (Mac addition) still shows the amount of the RMD rollover as income. I just entered my 1099-R into Turbotax and now it shows I owe income tax on it. Is this a bug in the software or am I not checking the correct boxes? I tried both ways, calling it a RMD or not an RMD. I added back the amount for tax withholding of my own funds.

[macuser_22]

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@jwdbond wrote:

This is correct interpretation of the IRS rules, but Turbotax (Mac addition) still shows the amount of the RMD rollover as income. I just entered my 1099-R into Turbotax and now it shows I owe income tax on it. Is this a bug in the software or am I not checking the correct boxes? I tried both ways, calling it a RMD or not an RMD. I added back the amount for tax withholding of my own funds.

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For a simple return of a RMD do not say that is was a RMD because the 2020 RMD did not exist.   NO 2020 distribution was a RMD.

The CARES act provisions fir the 3 year return of distributions, and the 8915-E form that reports them, has not yet be added to the TurboTax interview because as of now the new 891E for does not yet exist (it only exists in the DRAFT state at the IRS).   Until the IRS finishes and publishes the final form and releases the electronic file specifications for that form, TurboTax (and users) can only wait.   As of now, there is not even any estimated release date.

You can view the draft form here:

https://www.irs.gov/pub/irs-dft/f8915e--dft.pdf

https://www.irs.gov/pub/irs-dft/i8915e--dft.pdf

Subject to change of course since it is a draft.

(Historical fact - 2-3 years ago a late tax law that changed forms delayed the form release until May - June after the filing date- which caused many affected taxpayers to have to file extensions that gave them until Oct 15 to file.)

[dmertz]

It's still income in the sense that it must be reported on your tax return on Form 1040 line 4a, but the rollover makes it nontaxable income excluded from line 4b such that it does not affect anything else on your tax return.

[LeeB2]

I performed an RMD on 1 Jan 2020 and then reversed it in July. So no tax should be applied. Upon entering the 1099-R RMD data and selecting rollover, TurboTax says the income is not taxable. So far, so good. However, the income still shows up on line 4b. It should not be on line 4b, so there appears to be a bug of some kind in the software.

[dmertz]

Because the CARES Act waived RMDs for 2020, the distribution was not an RMD even if it was originally intended to be an RMD.  Delete the 1099-R from TurboTax, reenter it exactly as shown on the Form 1099-R provided by the payer, then answer the follow-up questions to indicate that none of the distribution was RMD, then indicate that you rolled the money over.

[LeeB2]

That procedure worked. Thank you. Awfully strange set-up, right? I wonder how many people will figure this out without needing help, as I did........ 

[dmertz]

Already many dozens of people here have asked the same question.  TurboTax's "important" note on the page with the RMD question is worse than not being there at all because it causes users to respond exactly opposite from the way that they should.

"If you still took your RMD" makes no sense because no distribution was an RMD.  In 2009 when RMDs were similarly waived, 2009 TurboTax simply eliminated the RMD question entirely.  That's what they should have done here.

[jwdbond]

As suggested, I have deleted the old 1099R as suggested and re-entered the data from my 1099R and answered the questions. Turbotax said that I will not have to pay taxes on the distribution, but it still includes the rollovered distribution as income and increases the taxes owed accordingly. Are we waiting for the 8915E form to correct the income?

[macuser_22]

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@jwdbond wrote:

As suggested, I have deleted the old 1099R as suggested and re-entered the data from my 1099R and answered the questions. Turbotax said that I will not have to pay taxes on the distribution, but it still includes the rollovered distribution as income and increases the taxes owed accordingly. Are we waiting for the 8915E form to correct the income?

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Where are you looking for "income".

It will show as income on the summary screen which shows gross income, not taxable income.

The IRS requires reporting all income on a *income* tax return - taxable and not-taxable.

The income will be reported on line 4a  and 4b on the 1040 form with the word “ROLLOVER” next to it if it was a rollover.

The taxable amount will go on the 1040 line 4b. In the case of a rollover, nothing goes on 4b.

[dmertz]

This has nothing to do with Form 8925-E.

The distribution is income in the sense that it is required to be reported on your tax return, but the amount rolled over is excludible from taxable income.  If you rolled over the entire gross amount of the distribution (substituting other funds for any amounts that might have been withheld for taxes), you should be seeing the enter distribution excluded from your taxable income.   If that's not the result, you've apparently somehow told TurboTax that the distribution was an RMD; you must tell TurboTax that the distribution was not an RMD.  Delete the 1099-R and try again.