Cares ACT RMD Reversal Snafu

[SanDieggo]

In Early March 2020 we did our normal RMD.  In late March 2020 the Cares act became law.  The act stated that there would be a 2020 RMD Holiday.   What to do as we just took our 2020 RMD...  Called our custodian and they said because of the act you can rollback your RMD, but you  had to replenish the withheld taxes so as to restore the full amount.  We did the the rollback... X dollars out X dollars back in.. a wash.  Roll forward to 2021 and we received a 1099R showing that we took an RMD of X dollars along with that  a form 5498 showing a rollover transaction for X dollars.  On the 1099R box 2a shows X dollars taxable.  Those  X dollars show up on line 4b on the 1040 as a distribution even though I answered the follow on questions regarding rollover when entering the 1099R data.   The only way I can make the 4b entry disappear is to override box 2a on the 1099 as a taxable amount zero.  I'm thinkin'  this might cause an issue with the IRS.   This transaction seems like an indirect rollover where you take possession of IRA funds and put it back within 60 days.   Is TT wrong by passing through the amount to line 1040 line 4b or did my custodian not handle the transaction correctly and my 1099R should have been coded differently i.e Box 7 .   Or am I in an alternate universe were my "do over" is a taxable event?. 

[DataJunkie]

I have a similar situation except besides taking my RMD and reversing it, I also withdrew an additional amount and rolled it over into a ROTH.  On my 1099R, the Gross distribution (Box 1) and the Taxable amount (Box 2a) include the amount that I reversed.  I called the broker and they said they would NOT revise the 1099R and that the amount that was reversed is shown on my 5498 as a Rollover contribution.  TurboTax says you don't need to enter your form 5498 information and do not include this form. 

[DataJunkie]

In looking at other posts, for your situation, it appears that you enter the information as it exists on the 1099R form, when you get to the section that asks "What did you do with the money ...", select "moved the money to another retirement account (or returned it to the same retirement account)". 

In the next question you are asked to "Choose which of the following applies" to which you reply "rolled over all of the money to another traditional IRA or other retirement account (or returned it to the same account)".  This appears to nullify the taxable income.

In my situation where I have both the reversal and a Roth conversion, TurboTax tells you to treat as separate transactions and create two 1099R forms and allocate the numbers so that the combined total of the two new 1099R's matches the original 1099R.

[SanDieggo]

 Unfortunately when you do the TT flavor RMD reversal by recharacterizing the transaction as an Indirect Rollover it's going to assume that the amount in Box 1 is to be totally not taxable and 1040 line 4b will be zero.  But in your case only the Roth conversion funds should be on line 4b.  I tried forcing an Override directly on line 4b but you can't  as that amount ultimately originates on the 1099-R even though TT set's it to zero. 

I'm grasping here .... create 2 1099-r's  one for the RMD, one for the ROTH funding as a normal distribution.  Run the RMD one as the Indirect rollover the other as a Normal Distribution see how that flows onto the 1040.  You really haven't altered anything, as all funds from the original 1099-R are accounted for .. they just get split.  Think of it as taking your RMD with custodian A and doing your Roth conversion with custodian B... you would get 2 1099-R's...correct?  Crank up TT  load your return, then do a SAVE AS with a new name and use that return to experiment.  

But  I'd still probably give TT a call and tell the CSR to pass you through to one of their higher level support folks.  If you know a CPA (who might be familiar with TT...)  try that....   

[hullian]

I'm having the same problem; no Roth conversion, just a simple rollover back to an account from where I took an RMD. TT asked the questions, I said I rolled over a part of the 1099-R amount, and I told it how much. But, line 4b on the 1040 is still showing ZERO, and TT inserted the word ROLLOVER under line 4a where the gross RMD amount is. Is TT going to fix this, is this an IRS issue yet to be resolved, or WHAT???????

[PattiF]

Here are the instructions on how to report this in TurboTax:

Please do not enter the returned amount as a contribution under the Deduction and Credit section. Please delete these entries:

1. Login to your TurboTax Account 
2. Click "Federal" from the left side of your screen
3. Click on “Deduction and Credits” tab on top
4. Click "edit" next to "Traditional and Roth IRA Contributions"
5. Remove the checkmark next to "Traditional IRA"
6. Select "yes" to "Remove Traditional IRA Contributions?"

Please follow these steps to enter your 1099-R and the return of RMD:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Continue until "How much was a RMD?" and select "none"
5. Continue "Tell us if you moved the money through a rollover or conversion" and select "I rolled over some or all of it to an IRA or other retirement account within the time limits (normally 60 days)"
6. Continue answering the questions.

 RMDs were waived for 2020 and you must indicate to TurboTax that none of the distribution was RMD. If you already enter the 1099-R as RMD then you must delete and reenter the 1099-R form. Only editing the 1099-R form and changing your answer to the RMD question will not work.

[VolvoGirl]

@hullian   Yes?  What is the problem?  That's how it's suppose to be. If you put it all back it should be zero taxable and say Rollover, even if you put it back into the same account.

[hullian]

The problem is that I only rolled over SOME of the distribution. On the TT 1099-R form it shows the amount of the PARTIAL rollover, but the 1040 is not reading it as partial, it's reading it as a total rollover, which is why line 4b on the 1040 says zero. It should be the amount of the partial rollover.

[hullian]

You say to "Login to your TurboTax Account".  I am using the desktop TurboTax Home and Business. I have done everything you said, and it STILL is not working correctly. It correctly records the 1099-R data, including the line on which the amount of the partial withdrawal is noted. But, that amount should be transferred to line 4b of the form 1040; it's not. That line is showing a ZERO amount. I did not tell it that this distribution was an RMD, but I still have the problem.

[VolvoGirl]

The 1099R doesn't show any rollover amount or partial amount.  It should show the total distribution.  Then you have to tell the program how much you put back. @dmertz 

[hullian]

I'm referring to the TT 1099-R Worksheet. After you go through the back and forth with TT, it generates the 1099-Worksheet, which you can see by going into FORMS. On that worksheet, on line B2 in the Rollovers, Roth Conversions, Roth Rollovers and Recharacterizations section of the form, Line B2 reads: "If only part was rolled over, enter the amount of the partial rollover."  That partial rollover is showing. It should ALSO be showing on line 4b of my 1040, but it is NOT.

[dmertz]

hullian, if you've indicated that you did a combination of rolling over, converting and cashing out, then entered in the rollover box the amount actually rolled over and TurboTax does not include the remainder of the distribution on Form 1040 line 4b, it seems that you have basis in nondeductible traditional IRA contributions and the taxable amount of the remainder is being calculated on Form 8606 Part I.  Make sure that you have clicked the Continue button on the Your 1099-R Entries page, confirmed the amount of basis that you carried in to 2020, the enter your year-end balance in traditional IRAs.  Without having entered your year-end balance under these circumstances, the correct taxable amount cannot be calculated on Form 8606.

[hullian]

My IRA is a Beneficiary IRA (non-spousal). There is no basis from a prior year.

[dmertz]

TurboTax is presently unreliable when it comes to reporting the repayment under IRS Notice 2020-51 of a distribution from a beneficiary IRA.  Many people on this forum have reported the same problems with this.

[hullian]

Just spoke on the phone with one of the very nice TurboTax support folks. She said that the IRS is preparing for use of Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments; it’s currently in draft, but that seems to be the way this issue will be addressed.