IRA RMD Incorrect Penalty?

[wa1fhy]

To make the numbers easy, let's say I have two IRAs with equal amounts and I have a total RMD this year of $1,000.  I decide, as it is my right, to take $100 from account #1 and $900 from account #2 to satisfy my RMD.

For account #1, I enter $100 from my 1099R and TT asks what my RMD is for that account.  Well, theoretically, it is $500, so I enter $500.  For account #2, I enter $900 from my 1099R and also fill in $500 for account #2's RMD.

TT will then assess me a penalty (25%) on the $400 that I am under-RMD-ed on account #1.

This is incorrect.  TT should be asking me what my total RMD is AFTER I enter in the 1099R information from all my 1099Rs.  Had TT done that, I would have entered $1,000 for the total RMD and that would have matched the sum of the $100 and $900 1099R distribution amounts.

The way TT phrases the questions is somewhat misleading.  The workaround appears to be that I simply "lie" and enter $100 as the RMD for the account that I took $100 out of and $900 as the RMD for the account I took $900 out of.

Explanation???

[MinhT1]

An IRA owner must calculate the RMD separately for each IRA that he or she owns, but can withdraw the total amount from one or more of the IRAs. 

If you are sure that you have satisfied all RMD requirements, then in TurboTax, on each form 1099-R for RMD withdrawals, answer that The entire distribution was an RMD then on the following page, to the question What is the RMD for your account? enter the amount of the distribution from that IRA account.

By doing this, you are telling TurboTax that all RMDs are satisfied and TurboTax will not calculate any penalty. The information you entered in TurboTax is to enable TurboTax to calculate any penalty where applicable, and is not reported to the IRS.

Similarly, a 403(b) contract owner must calculate the RMD separately for each 403(b) contract that he or she owns, but can take the total amount from one or more of the 403(b) contracts.

However, RMDs required from other types of retirement plans, such as 401(k) and 457(b) plans have to be taken separately from each of those plan accounts.

Please read this IRS FAQ for more information.

[wa1fhy]

Thanks for the quick reply.  It was pretty much as I had guessed.

I understand TT's approach of asking for each account's RMD separately, particularly in the case where one has different types of retirement accounts (IRA, 401k, 403b, etc.) where you have to individually take the RMD on each type.

But maybe there could be a note on the particular interview page where it asks for the account's RMD to the effect that if you are legitimately combining distributions from multiple accounts within the same category to arrive at your total RMD, then you should enter the RMD amount equal to the distribution amount for each.  

I'm sure there are thousands of retirees with IRAs at multiple financial institutions doing this and the way TT words the question, it is somewhat confusing.