Inherited IRA money was received and moved into inherited IRA within 60 days

[civilsurfer1]

I inherited an IRA from my uncle's passing, and I received a check that I deposited into an inherited IRA within the required 60 day window (I understand that this makes it non-taxable). Why am I being taxed per my 1099R for the full inherited IRA amount?  There are no turbotax online options to choose "I rolled this over into an inherited IRA within 60 days".  Do you know the process here? 

As a side question--It seems like if we pay the taxes on the full amount now, and we pay taxes on each RMD, we're being taxed twice.  

[Mike9241]

what letters appear in box 7 of the 1099R?

[DaveF1006]

In the tax code, the 60-day indirect rollover rule generally does not apply to non-spouse beneficiaries (like a niece or nephew).

Trustee-to-Trustee only: To keep an inherited IRA from an uncle non-taxable, the funds must move directly from one bank to another via a "Trustee-to-Trustee Transfer." Since you received a check instead of  transfer, this is taxable.  If the check was made out to you personally and you deposited it, the IRS views this as a completed distribution. Once you touch the money, it is taxable, and it cannot be "put back" into an inherited IRA.

TurboTax detects  Code 4 in Box 7 of your 1099-R (which stands for Death/Beneficiary) and knows that for a non-spouse, an indirect rollover isn't an option. This is why you don't see the "I rolled this over" checkbox.

The only caveat to this situation is if the check was made out to your new inherited IRA provider listing you as a beneficiary on the check. If so, this makes this a trustee-to-trustee rollover and is not taxable. Don't try to do this unless your check was made out to the provider AND NOT TO YOU.

[dmertz]

Expanding on what DaveF1006 said, because a IRA inherited by a non-spouse beneficiary can only be moved by nonreportable trustee-to-trustee transfer, TurboTax prohibits you from reporting a distribution from an inherited IRA as having been rolled over.

If the funds were paid to you personally and you then deposited them into another inherited IRA, that deposit is a failed rollover and instead constitutes an excess ordinary contribution that is subject to penalty unless corrected by a return of contribution by the due date of your tax return, including extensions.

If the funds were instead made payable directly to the new inherited IRA (or at least to the new IRA custodian for your benefit and deposited directly into the new inherited IRA), no Form 1099-R should have been issued.  In this case you would need to obtain a corrected Form 1099-R from the original IRA custodian indicating that $0 was distributed.  There should also be no Form 5498 from the new inherited IRA indicating receipt of a rollover.