Taxation on RMDs

An IRA owner must calculate the RMD separately for each IRA that he or she owns, but can withdraw the total amount from one or more of the IRAs. 

If you are sure that you have satisfied all RMD requirements, then in TurboTax, on each form 1099-R for RMD withdrawals, answer that The entire distribution was an RMD then on the following page, to the question What is the RMD for your account? enter the amount of the distribution from that IRA account.

By doing this, you are telling TurboTax that all RMDs are satisfied and TurboTax will not calculate any penalty. The information you entered in TurboTax is to enable TurboTax to calculate any penalty where applicable, and is not reported to the IRS.

Similarly, a 403(b) contract owner must calculate the RMD separately for each 403(b) contract that he or she owns, but can take the total amount from one or more of the 403(b) contracts.

However, RMDs required from other types of retirement plans, such as 401(k) and 457(b) plans have to be taken separately from each of those plan accounts.

Please read this IRS FAQ for more information.

Thank you for the response.  I appreciate it.

I do understand that IRAs are treated differently than other retirement plans.

For each of the 4 IRAs I have entered they are set to the entire distribution being an RMD.  The only difference is with the account which distributed less than its RMD.  In this case I get an extra screen telling me that the difference could be taxed but the rate will be lower if I withdrew the difference during the correction window.  I can answer Yes, or No. 

So, it seems like TTax is NOT summing up the distributions and RMDs

You are correct.  Currently, TurboTax is looking at the distribution from each 1099-R separately and will add the Form 5329 for the penalty without looking the the total of all the distributions added together.  An update is being worked on.  The amounts for the RMD are not reported to the IRS if there is no penalty, it is used by TurboTax for calculation of the penalty so you can wait for the update, or as a workaround answer Yes you will withdraw in the correction window so you can file now.  @kfbrady 

Thank you for posting this.

And kudos for providing a workaround.

Kevin.

Just to add... While I am using TTax Deluxe on my Win 11 PC I did also try inputting my data to the web version.  It handled the RMD data incorrectly and in exactly the same way as the desktop version.

"You are correct.  Currently, TurboTax is looking at the distribution from each 1099-R separately and will add the Form 5329 for the penalty without looking the the total of all the distributions added together.  An update is being worked on.  The amounts for the RMD are not reported to the IRS if there is no penalty, it is used by TurboTax for calculation of the penalty so you can wait for the update, or as a workaround answer Yes you will withdraw in the correction window so you can file now. "

I just finished my 2024 return.  I answered "Yes" to withdrawing the balance during the correction window as advised. I also selected "Yes" to meeting the RMD for the year.  The software then shows that the balance was taxed and asks if I would like to fill out a waiver.  Whether I answer Yes or No TTax still generates a Form 5329 with an additional tax on the balance and includes this in my return.

Is there an ETA for the update?

kfBrady,

You are not alone, I have exactly same problem with 2024 Turbo tax premium. Totals of RMDs and actual distributions are not properly calculated. The 1099-R that have actual distribution higher than RMD to cover rest of 1099-Rs don't used in total calculations and as a result form 5329 generated and additional taxation applied. I used "override" in 5329 and enter correct amounts. That removes additional tax penalty for not satisfying RMD.

The best way is wait until the bug will be fixed, or you can leave with 5329 overwritten lines 52a and 53a

@kfbrady @bosh   

When it asks about the RMD it is only asking for that one 1099R you are entering. You need to enter the amount from box 1 on that single 1099R for the RMD, not the total RMD for all and even if it is more or less than the total.  You won’t need to override anything or fill out a waiver, etc.   Just say it was all the RMD and put in the same amount that’s in box 1.

Thanks for your response but that's not the issue, or the answer - of course for each 1099-R only the gross distribution in Box 1 of that 1099-R is being entered.

The issue is that for IRAs, TTax should be summing the distributions from ALL the 1099-Rs and comparing that to the sum of ALL required RMDs for each account before deciding whether the requirements have been met, and only then calculating the tax owed if there is a deficit.  

Unfortunately, TTax is comparing the distribution from each 10-99 against the RMD for each one and deciding on a 1099-R by 1099-R basis whether there is a deficit. 

This is from TTax's own help info..."IRA accounts (except inherited IRA accounts)
For IRA accounts, start by adding up the RMD for each account. (Your account administrator should provide the RMD amount for you.) Then add up the qualified distributions taken from all accounts. As long as the TOTAL qualified distributions from all IRA accounts meets or exceeds the TOTAL RMD for all IRA accounts combined, then you've met the RMD requirements for your IRA accounts."

I'm quite sure this much be impacting a lot of seniors.  I hope they get a fix sooner rather than later.

Maybe you misunderstood me.   After you enter each 1099R it will ask if it was the RMD.   Say Yes, then for the RMD question enter the same amount from box 1.   

We know they changed it this year and are not adding up all the IRA totals for the RMD.  It needs fixing.   So until they fix it you have to answer box 1 is the RMD for each one.   

I think I'm clear on it now...

For only 1099-Rs that show an RMD deficit, when TTax asks for the RMD for that one account on the "Let's get more information..." page, you need to put in a value that is greater than zero, but less than or equal to the distribution from the account (even if the actual value of the RMD should be higher).  Entering the amount of the entire distribution satisfies this.

TTax will then cancel out any tax that it had previously calculated for that account, remove the Form 5329 from your return, and you will see your Federal tax bill adjusted accordingly.  Certainly on my fairly simple return there are no mentions of RMDs anywhere else so this information is not passed on to the IRS.  However RMD data is sent to the IRS by investment companies.  So if you are in RMD deficit over your entire IRAs it's probably not a good idea to do this.

Thanks to all who have responded.

Actually, the RMD amounts ARE reported to the IRS by the companies holding your IRAs - it just might take them a while to catch up to you.  I was having this exact same issue - multiple RMD withdrawals from 3 different IRA accounts that exceeded my total RMD required.  I thought I was losing my mind since TurboTax did not add correctly add all the RMDs/withdrawals.  

Please fix this!!!

After opening my 2024 return today, my projected $500 refund amount turned into me owing $600 to the IRS. It looks like the latest update is treating my RMD amount as a penalty. The RMD amount is about half of the total I have listed in Box 1. I'm only withdrawing money form this one particular inherited IRA. If I put 0 in the RMD amount, then there is no penalty. For every dollar I put in RMD box (up to the amount in Box 1, the penalty increases. Again, this only appeared when my TurboTax updated this morning (with no changes to my last saved 2024 return). I assume this is a programming issue (maybe the analysts were trying to solve the issue described by these other TurboTax users).

You do realize that inherited IRAs are handled differently than non-inherited ones right?  And the RMD amount depends on what type beneficiary you are: designated, non-designated or spousal.

Of course RMD information is sent to the IRS, just not on your tax return if you are not in deficit.  That’s what I meant when I wrote “However RMD data is sent to the IRS by investment companies.  So if you are in RMD deficit over your entire IRAs it's probably not a good idea to do this.”

Yes, of course. In this case, it was my father and and I will be following the 10 year rule for a inherited IRA. My point was that after today's update to TurboTax 2024, the amount of the RMD was subjected to a 25% penalty. I had made no changes to my return other then opening it up after the update. What I have discovered though since posting my previous message is that the update had reset the RMD amount to zero when declaring how much of the RMD was included in the total distribution for 2024. So there isn't an issue (other than having to re enter in this information after the update).

Glad you got it all figured out.  This year’s release of TTax has been a bit of a mess.

I got my return e-filed and received both Federal and State refunds within about 10 days, so I’m a happy camper.

I am having the same problem now with the latest update.  The real problem is not being addressed, which is that the RMDs for all IRAs can be withdrawn from a single IRA account.  When this is done, there is only one 1099-R for that single account, so there cannot be any "matching" to 1099-Rs possible.  What Turbotax needs to do is, when asking what you are doing with the amount remaining, have the option to say "Used it to satisfy the RMD for my other IRAs".  There still is no balancing to the RMDs for the other IRAs.  Only the 5498s have the information needed to balance.  At least with the additional option, you would be able to document that the remainder of the withdrawal is going to RMDs for other IRAs.  I am describing the case where a single IRA account is used to satisfy all RMDs.  This would apply to any situation where at least one IRA did not have a withdrawal to satisfy its RMD, and, therefore, there is no 1099-R for it.  All the "Used it to satisfy the RMD for my other IRAs" document that the remainder of each withdrawal is going to satisfy the total of the RMD amounts for all the IRAs

I don't believe that's the "real problem".

TurboTax just needs to total all the distributions, total all the RMDs, and then compare the two totals.  Exactly how many distributions doesn't come into it.  If the total of the distributions is equal to or greater than the the total of the RMDs then no tax situation applies.  Simple.

There is no place in Turbotax to enter the RMDs for the IRA accounts where there was no withdrawal.  That information is entered when you enter a 1099-R in Turbotax, but there are no 1099-Rs to enter for those IRA accounts where there is no withdrawal.  In addition, even if there were, those RMDs would just be what you calculated them to be, unless you used the Form 5498s, and, without the Federal Tax ID of the sender of the Form 5498, those RMDs would just be a list of amounts, not tied to anything.  I would be fine with being asked just to list on a Turbotax worksheet the other RMDs that I calculated.  That is not what is happening, though.  If you are suggesting using Form View, I might as well fill out my returns manually.  Example with IRA 1 and IRA 2:

IRA1 RMD Amount $1000 Withdrawal Amount $1050

IRA2 RMD Amount $50 Withdrawal Amount $0

You receive a 1099-R for IRA1 for $1050 and enter the information in Turbotax.  Turbotax asks how much of that $1050 is for RMD but the update yesterday now states to not include the RMD for other retirement accounts you may have and that RMDs for other accounts should be entered separately, but where?  So you enter $1000.  Turbotax asks you what you are doing with the rest (the $50), and the options are Rollover to a different or the same retirement account or Something else.  If you enter Something else, Turbotax does not credit the $50 as a withdrawal to satisfy an RMD.  Turbotax later asks  if you missed a required distribution from any retirement accounts and to select any account type for which you did not take a distribution in 2024 even though an RMD was due by December 31, 2024.  One of the options is None of these plans failed to withdraw the RMD.  This seems to mean that this question is account specific, so the answer would be No (it actually is not a Yes / No question, as the other options are the plan type where the RMD was not withdrawn).  If you enter the option of An IRA, including SEP-IRA, SARSEP, or SIMPLE IRA (but not including inherited IRAs), Turbotax indicates that there is a penalty for not making the withdrawal, and proceeds accordingly.  If you enter the option of None of these plans failed to withdraw the RMD, there is no message about a penalty, but the amount of Federal tax due is different from what it was before the Turbotax update, which leads me to believe that there still is a problem. 

I agree.  It sounds like TurboTax botched the fix!

And of course, there can still be an RMD on an IRA with no distribution, which sounds like something they never thought of.

Same or similar question - 

I received an inherited RMD which is on a 1099-R and was taxed. But when you get to the RMD field, it would seem you should enter what was indeed paid out but when doing so you get whacked with a huge penalty. Why would you get a further hit on a death related RMD?? And are you supposed to report the RMD this way or is it saying that you should report only that which you were supposed to get an RMD for and did not??

Most of you are speaking of multiple IRAs and trying to total the RMD requirement. We only have one inherited IRA and are meeting the RMD so why is it all being treated like there should be a penalty?

1) Does the RMD amount show on your 1099?  None of my 1099s show it and typically you have to calculate it, or get it from your investment company or financial advisor. 

2) Is the RMD for the IRA greater than the distribution you received from it?  If so, then you'll pay taxes not only on the distribution (which your investment company has probably taken out and will show on your 1099) but also on the difference (which TTax will calculate and create a form 5329 for).  Unless of course, TTax has a bug in its software!

3) To answer your question, in TTax you should supply both the Distribution Amount and the Required Minimum Distribution for your IRA.

4) For an inherited IRA there are also considerations depending on the date of the death of the account holder; the 5 year rule and the new 10 year rule. 

See https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary

I wish that answered the question. I went back to TT 2023 - it had a different Q&A surrounding the RMD. IDK if RMD rules changed but no matter what I put in the RMD for an amount, I am taxed 25% unless I leave it blank. So it appears TT isn't recognizing there is an RMD at all and is treating any amount entered as penalty worthy. No, I am not up to the 25% tax bracket and even if I were, this has already had taxes taken out so while there could be some additional tax, certainly not an additional 25%.