It depends. If the taxes have already been withheld, the tax will be credited to your account as a tax payment with the IRS. If the distribution did occur, even though it was not required, you could still receive Form 1099-R and have to report that income.
I suggest consulting your financial planner for information about their particular method of reversing an unneeded RMD.
See this article for information about Reporting Form 1099-R.
Please see these resources for further IRS guidance:
January 27, 2020 IRS Provides relief to financial institutions affected by tax law change raising the age for required minimum distributions
Notice 2020-6 Relief for Reporting Required Minimum Distributions for IRAs for 2020.
The new $2T CARES bill eliminated the REQUIREMENT for the RMD.
If you already took the RMD, then pay the tax on that.
Note: You have 60 days to roll the money back into your IRA (or a different IRA).
Depending on the date of distribution, that 60 day period may have a few day remaining for you to take advantage of.
How would you roll the RMD back into your IRA?
What if you delete the RMD from the worksheet but leave the tax paid there? Since the tax has already been sent to the IRS by the custodian it will show as a credit to total taxes paid and be refunded.
Only an RMD distributed in 2020 can be rolled back to an IRA. An RMD distributed in 2020 should not appear anywhere on the 2019 tax return that you are preparing now, so such a distribution should not be on any worksheet in 2019 TurboTax to begin with.
Agree. There is some discussion about extending the 60 day rule which I think would be fair. Many people already took the RMD over 60 days ago. If they did take the RMD and had taxes withheld these taxes will carry over as a credit to next year's 2020 filing.
OK. I took my RMD before guidance was issued that it was not required under the CARES Act. So within the 60 rollover window, I rolled the net amount back into the IRA). But Federal and state taxes for 2020 were withheld and could not be refunded. So how do I adjust my estimated taxes (I'm retired so there is no W-2 income) which are driven by the 100% or 110% safe harbor rules. I don't want to pay excess estimated taxes? Maybe the easiest way is to reduce my tax withholding on my pensions for the remainder of 2020.
Any other ideas regarding the TT program adjustments?
More to my story:
I rolled both the net distribution and some after tax money to allow the IRA to have the entire amount it had before the distribution. So in 2020, do I need to adjust the IRS Form 8606 to increase the basis of the rollover contribution by the amount of taxes already paid?
@sansouci wrote:
OK. I took my RMD before guidance was issued that it was not required under the CARES Act. So within the 60 rollover window, I rolled the net amount back into the IRA). But Federal and state taxes for 2020 were withheld and could not be refunded. So how do I adjust my estimated taxes (I'm retired so there is no W-2 income) which are driven by the 100% or 110% safe harbor rules. I don't want to pay excess estimated taxes? Maybe the easiest way is to reduce my tax withholding on my pensions for the remainder of 2020.
Any other ideas regarding the TT program adjustments?
There aren't any adjustments to make in Turbotax, the program is designed for end of year tax preparation, not mid-year tax planning.
You already know the answer here. If you had (for example) $1500 of estimated taxes withheld and don't want to wait for a refund, reduce your other withholding by $1500 over the rest of the year (about $250/month for 6 months).
Your basis does not increase by substituting other funds to replace those withheld for taxes because taxes can only be paid with after-tax money. You are simply replacing one after-tax dollar with another after-tax dollar, so there is no change in basis (and by rolling over that dollar it goes back to being pre-tax since it will be excluded from from your AGI on your tax return). The taxable result of rolling over the entire gross amount of a distribution is the same as if the distribution never happened.
Have not & do not plan to take 2020 RMD based on new tax bill. Used TurboTax for 2019 tax prep & now wondering about the est. tax calculations for 2020. I am thinking TurboTax calculated a 2020 RMD distribution, like previous years & based my est. taxes for 2020 using this income? So are my estimated payments accurate or must I recalculate & if so, can I do this with my 2019 TurboTax software? Need advice please.
If you are paying estimates based on the expected RMD and you are not taking the distribution then of course the estimates will be too high ... so don't make the 4th quarter payment in January. Then when you complete the 2020 return the excess payments will be refunded automatically. Then you can decide how much to get and how much to use to pay the 2021 estimated payments.
I have my 1099R which includes money withdrawn and taxes paid, but in September I reversed my distribution but taxes are still paid. Talked to Vanguard about how reversal works and they said my Turbo Tax should have a question on how to handle money reversed on RMD. I'm unable to find this box on Turbo Tax 1099R form???
Help
Since there is no RMD required for 2020, after you enter the 1099R say it was NOT an RMD and then that you rolled it over (even if back into the same account). Was any withholding taken out? If it was then did you replace the withholding with your own money? Otherwise the withholding will be a taxable distribution itself.
If I check the box (No, none of this withdrawal was an RMD), won't I still have to pay tax on this?
How would IRS know the fund was rolled back into the account?
Does Turbo Tax still account for this as income, I don't want to pay tax on funds which was reversed.
Also the tax was not paid back and shows on 1099R, how do I use this tax as credit to apply to other income?
If you put it back in you don't pay tax on it. After you enter the 1099R Turbo Tax asks if you rolled it over. Say YES even if you put it back into the same account. You will still get credit for the withholding in box 4.
But if you did not put back the full gross amount (before the withholding was taken) out then the withholding amount itself becomes taxable income. And you still get credit for the withholding.
Turbo Tax will show it as income on the Review and summary screens but on your actual 1040 it will say ROLLOVER by the taxable line.
@kokjohnj wrote:
If I check the box (No, none of this withdrawal was an RMD), won't I still have to pay tax on this?
How would IRS know the fund was rolled back into the account?
Does Turbo Tax still account for this as income, I don't want to pay tax on funds which was reversed.
Also the tax was not paid back and shows on 1099R, how do I use this tax as credit to apply to other income?
You enter the 1099-R as a rollover so it goes on the 1040 form line 4a as income with the word ROLLOVER next to it ans a taxable amount of 0 on line 4b.
Enter a 1099-R here:
Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).
OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.
Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.
If this was a rollover or conversion, answer the question that you moved the money to another retirement account (can be the same account). The screen will open up with choices of where it was moved.
[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]
It will show as income on the summary screen which shows gross income, not taxable income.
The income will be reported on line 4a on the 1040 form with the word “ROLLOVER” next to it if it was a rollover.
The taxable amount will go on line 4b. In the case of a rollover, that amount will be zero.
Think I'm having issue because it was inherited IRA, I don't get prompted for the questions you mention unless I say no to inherit the IRA from such and such. If I do say no to inherited the IRA it does prompt me like you said. But the amount box 4 for tax withheld does increase my federal refund like it should.
@macuser_22 When I enter a test IRA RMD in Online it then asks me when the original owner was born? And how old they would be if they lived. I didn't say it was inherited. Is that right? I shouldn't get that screen. Can you check or pass it on?
@VolvoGirl wrote:
@macuser_22 When I enter a test IRA RMD in Online it then asks me when the original owner was born? And how old they would be if they lived. I didn't say it was inherited. Is that right? I shouldn't get that screen. Can you check or pass it on?
It should only ask that question if the box 7 code was a 4, which IS inherited or can be in the case of a T - you do not need to say that it is inherited the code says that. What box 7 code did you enter?
I entered a 7. I couldn't get past that screen. I don't know what triggered it. I said none of the above on the list of uncommon situations which was the page right before. If I check the box I inherited it then it asks me from who. If I fill that out then it does not ask me about the original owner screen. I think the wording is just wrong on that screen or that screen is not needed.
I entered 4 (death) on box 7, then it asks me a series of questions. unitl I reach
Was this withdrawl and RMD,
I check yes and all of distribution was an RMD
then it exits to main 1099R screen
There was NO RMD requirement in 2020 so you need to say NO to the RMD question.
@VolvoGirl wrote:
I entered a 7. I couldn't get past that screen. I don't know what triggered it. I said none of the above on the list of uncommon situations which was the page right before. If I check the box I inherited it then it asks me from who. If I fill that out then it does not ask me about the original owner screen. I think the wording is just wrong on that screen or that screen is not needed.
If you checked the IRA box then TurboTax asks if it was inherited (I don't know why but has asked for years) but answering no shoukd not ask any more questions. Delete and retry.
@kokjohnj wrote:
I entered 4 (death) on box 7, then it asks me a series of questions. unitl I reach
Was this withdrawl and RMD,
I check yes and all of distribution was an RMD
then it exits to main 1099R screen
If this is 2020 1099-R the answer NO, it was NOT an RMD and you were not required to even take it. There is no RMD for 2020.