Distribution from Inherited non qualified annuity not being handled correctly by Turbotax Home & Business for 2024

[Forrest Gump]

The downloadable Turbotax Home and Business for 2024 returns is not letting me enter the correct information for a distribution from a nonqualified annuity that I inherited 7 years ago.

When the decedent died, I elected the nonqualified beneficiary stretch option, pursuant to which I am required to take annual RMDs over my life expectancy. Even though this is not an IRA or a qualified plan, I have to take an RMD every year.

Each year, I receive a 1099-R with code 4D in box 7, which indicates this is a distribution from a nonqualified annuity after death of the owner.

For the past 6 years, when the interview asked if the decedent was born before 1-1-1950, I selected the radio button to indicate that he was born before 1-1-1950, and the next page would inform me that, because the person would have been over 73, I must take an RMD. So, I would check the boxes to indicate that the entire distribution was an RMD. And the interview would move on to the next topic, and not flag any errors. And I would efile my return without issue.

However, Turbotax 2024 changed the 1099-R form in the program, and there is a new section on the form called RMD Excess Accumulation Worksheet. And they changed the interview questions, and it appears they introduced a new error this year.

For 2024, when the interview asks if the decedent was born before 1-1-1950, and I select the radio button to indicate that he was born before 1-1-1950, the next page no longer informs me that, because the person would have been over 73, I must take an RMD, like in past years.

Instead, the interview asks me if the distribution is from either a 430(b) plan or another type of qualified plan. I have to select one of those choices, even though this nonqualified annuity is not a qualified plan. So, I select that it's another type of qualified plan, and the next page says that, if I am required to take an RMD from this account in 2024, enter the amount.

However, when I enter the amount of the RMD I am required to take under the beneficiary stretch option rules, a little message appears and informs me "RMD amount should not be entered for this distribution." Whether I put the amount of the RMD or zero in that box, there is a red exclamation (indicating an error) mark next to the Form 1099-R in the list of "forms in my return." And the numbers I enter are red on the Form 1099-R indicating an error. And nothing I have tried gets rid of the red exclamation point or numbers.

And even though I took the full required RMD, it appears to be believe that I did not take the full amount, because it then asks me if I took the remaining amount of the RMD during the correction window.

Turbotax is not handling this distribution correctly, and I would appreciate any help. Thank you.

[DavidD66]

TurboTax has identified the issue you are experiencing and is working to resolve it.  Please go to the following Help article about the error and to sign up to receive progress updates on the situation.   Please note, although the Help article references code 7D, it is the same issue you are experiencing with code 4D.  

Why am I getting an error when entering Form 1099-R box 7 code 7D? 

[Edited: 3/11/1015- 10:33 AM pdt]

[Forrest Gump]

David, thank you for letting me know they are working to fix this bug. However, the link you provided takes me to a webpage outside of Turbotax, and it asks me to sign in, but I don't have sign in credentials, and it doesn't offer a way to sign up.  Do you know how I can access it?

[DavidD66]

You will need to create an account.  At the bottom of the sign-in screen, you should see the following:

New to Intuit? Create an account

Or you can go to Create an Intuit Account

[rkingrea]

I am having the same issue.  Is there any time frame when this will be resolved.

Thanks

[Topsail Pablo]

I have encountered the same problem.  The program calculates an erroneous RMD penalty with respect to my inherited annuity contract even though I respond that all of the amount I received in 2024 was an RMD for this account.  I found that I can force the program to eliminate the penalty by responding in the interview that the RMD for this account is zero. 

Although there is in fact a required minimum distribution for this annuity (again, the amount of the RMD equaled the amount of the actual distribution), I can see no downside to this workaround, since to my knowledge it does not affect any forms on the tax return or the accuracy of the tax return as filed.  I would welcome any thoughts.

I should note that I also have an inherited IRA and a pension plan with RMDs (which were received in full) that the program does not generate an erroneous RMD penalty for.  I may have completed the step-by-step interview for these before the Turbotax program was recently updated, but I am reluctant to revisit the step-by-step interview for them to see if a problem occurs.

[jojokiki]

David66- the link provided is to a website that has "Khoros" in the welcome page. Although the url includes "turbotax" in the site address, I am VERY reluctant to enter any information about TurboTax login on a site that says "Khoros". Is this for real?

[beccabee75]

I am having the same problem.  I did find a way to escape the dreaded infinite loop and that is by just entering the code "D" in Box 7 (eliminating the code "4").  My final tax owed remained the same.  I don't know if this would cause an alert with the IRS since the amount of tax I will be paying seems to be correct. I have put too much time trying to figure out the correct way to enter my information and certainly don't want to print out my return and mail it.  

[Topsail Pablo]

If you have an Intuit account,  make sure you're signed in and click on the link he provides at the bottom of his message:  "Or you can go to Create an Intuit Account".  When I clicked on that link, I saw the "article" he referred to and was able to sign up for any updates.  I too was reluctant to sign in to the Khoros website.

[Topsail Pablo]

By dropping the number "4" you are changing the number on your 1099-R, a copy of which goes to the IRS.  This may be immaterial but the disparity could also trigger some sort of review of the return.  To my knowledge, the workaround I suggested--simply telling the Turbotax step-by-step "interviewer" that there is no RMD for the account--does not misrepresent the information on the 1099-R or otherwise result in any misrepresentations on the final tax return or accompanying forms, and properly reflects the amount of tax owed (i.e., without an erroneously generated underpayment of RMDs penalty).