We entered an IRA amount of 51,849. The turbo tax application showed 10,000. Why was this not populated correctly?

[jamesanddarlenec]

We received an IRA amount from my deceased mother. The IRS has now stated we owe taxes for 41,849.

[VolvoGirl]

You entered the 1099R?  What lines did it show up on?  Is the full 51,849 on line 4a and only 10,000 taxable on line 4b?  On the 1099R how much is in box 2a and are any boxes checked in 2b?  After you enter the 1099R there are several pages of questions you have to answer right.  Maybe you answered one wrong.   Did you get the cash or keep it in a IRA?

[jamesanddarlenec]

Line 4a is 51850, line 4b is 10,000. On the 1099 R 2a is 51849.80 and 2b was checked as "taxable amount not determined".  It was transferred directly to a savings account.

[Opus 17]

You always owe your correct tax.  If you took a full distribution of a traditional IRA, you owe tax on the entire amount.  Pay the tax.  (If you like, you can prepare an amended return for that year to make sure the tax calculation is correct.)

If the mistake was a program error and your data entry error, the turbotax accuracy guarantee is supposed to cover interest and penalties, but not your tax, because you always owe your own correct tax.  You must file a claim for the accuracy guarantee within 60 days of getting a bill for the penalties and interest.  https://ttlc.intuit.com/turbotax-support/en-us/help-article/intuit-account-billing/submit-claim-turb...

[jamesanddarlenec]

Looking at the 1099-R,  in box 4, the federal income tax withheld was $5184.98

[dmertz]

A distribution made to the beneficiary of an IRA will have code 4 in box 7 and will have the IRA/SEP/SIMPLE box marked.  If the Form 1099-R provided by the payer does not agree with this, the distribution is not from an inherited IRA.  In that case, what is the code in box 7 and is the IRA/SEP/SIMPLE box marked?

For a distribution from an inherited IRA, TurboTax asks you to explicitly enter the amount that is taxable because less than the full amount would be taxable if the decedent had basis in nondeductible traditional IRA contributions.  The result you see suggests that you entered $10,000 as the taxable amount when TurboTax asked for this.  TurboTax then uses this entry to replace the amount you originally entered into box 2a of TurboTax's 1099R form.

Either edit this form 1099-R and correct the box 2a entry or delete and reenter this Form 1099-R, paying close attention to what TurboTax is asking for.

[jamesanddarlenec]

On the 1099-R box 7 -code is 4 and there is an X for IRA/SEP/SIMPLE.

So for the IRS we can send a copy of the 1099-R that has the taxes already paid? 

[Opus 17 · Accepted solution]

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@jamesanddarlenec wrote:

On the 1099-R box 7 -code is 4 and there is an X for IRA/SEP/SIMPLE.

So for the IRS we can send a copy of the 1099-R that has the taxes already paid? 

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You are jumping the gun.  If $5100 was withheld (10%), that is way less than you would normally owe.  Depending on your other income, you probably owed 12% or 22%.

What you are supposed to do is enter the 1099-R as is.  The taxable amount is added to your taxable income, and the withholding is added to your other withholding and tax payments.  

It sounds like you entered the wrong amount of taxable income.  You told Turbotax that $10,000 was taxable, when in reality all $51,000 was taxable.  (Or, it was a program error, but this is unlikely.)  You probably already claimed the $5100 of withholding and got credit for it on your return, this would be shown on your 1040.

You need to prepare an amended tax return to recalculate your tax and determine how much your underpayment was. 

[jamesanddarlenec]

Thank you