Inherited IRA Box 7 Code of 4 removes all taxes?

RickM2 · ‎February 28, 2022

Using Turbotax Desktop, Feb 23 2022 update, entering 1099-R for an inherited IRA (from 2018 so using 10 year withdrawal plan). 1099-R entered exactly as printed on 1099-R: boxes #1, 2a, 2b (Taxable amount not determined), #4 0.00 -- results in, initially a 28% tax, but after entering code 4 in box 7, and checking of the IRA/SEP/SIMPLE box, all taxes go to "0". I expected to pay tax on this. Can anyone explain why Turbotax is showing no tax? again, I entered the 1099-R exactly as received.

DawnC · ‎February 28, 2022

Have you answered the follow-up questions yet? TurboTax is probably in mid-computation and you need to answer the follow-up questions for that Form 1099-R and the questions that come at the end of the retirement income section. Once you get all the way through the retirement section, you should see the income on Form 1040. The full amount of the distribution will be on line 4a and the taxable amount will be on 4b.

Generally speaking, only the distributions from an inherited Traditional IRA are taxable, just as they are for non-inherited Traditional IRAs. Distributions from an inherited Roth are not taxable unless the Roth was established within the past 5 years.

You may want to delete that 1099-R and re-enter it in case anything is 'stuck'. How do I view and delete forms in TurboTax Online?

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LudwigVan_fan · ‎February 28, 2022

You may have to go through and review all the the questions TT asks for this F1099-R. You might be entering the F1099-R correctly, but as to TT's handling of it, it might depend on answers to the questions for that particular 1099-R.

Also, for reference about 1099-R and the codes, see this link:

https://www.irs.gov/pub/irs-pdf/i1099r.pdf

Is this inherited IRA traditional? Roth? Did the former owner make any after tax contributions? If traditional and no after tax contributions, then it probably should be taxable.

**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**

DawnC · ‎February 28, 2022

Have you answered the follow-up questions yet? TurboTax is probably in mid-computation and you need to answer the follow-up questions for that Form 1099-R and the questions that come at the end of the retirement income section. Once you get all the way through the retirement section, you should see the income on Form 1040. The full amount of the distribution will be on line 4a and the taxable amount will be on 4b.

Generally speaking, only the distributions from an inherited Traditional IRA are taxable, just as they are for non-inherited Traditional IRAs. Distributions from an inherited Roth are not taxable unless the Roth was established within the past 5 years.

You may want to delete that 1099-R and re-enter it in case anything is 'stuck'. How do I view and delete forms in TurboTax Online?

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

RickM2 · ‎February 28, 2022

Thank you both! All valid comments, the most important help was completing the after 1099-R questions which at the end added the expected tax back on. Seeing the tax disappear during the entry of 1099-R did throw me as I have never seen Turbotax readjust like this before.

Excellent help, I appreciate it very much.

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Inherited IRA Box 7 Code of 4 removes all taxes?