Cares ACT RMD Reversal Snafu

[dmertz]

Repayment of a distribution from a beneficiary IRA under IRS Notice 2020-51 has nothing to do with Form 8915-E although the developers might be scheduling these separate issues to be resolved together.

[hullian]

The TT support person told me that IRS is considering Covid a "disaster", which the 8915-E addresses. There has been so much back-and-forth, between the CARES Act and then the June IRS policy announcement in June that it wouldn't surprise me if the IRS is still trying to figure out how to handle all this. Anyway, it remains that there is an unresolved issue within the TT calculation process - it simply does not account on the 1040 for partial rollovers of beneficiary IRA distributions. At this point I've removed the 1099-R from the software and will just wait a few weeks til the dust settles.

[dmertz]

If the entire distribution was permissibly rolled over pursuant to IRS Notice 2020-51, there is no distribution to report on Form 8915-E.

Form 8915-E is for reporting distributions so that the taxable income can be spread over three years and so that the distribution can be repaid over three years (except that repayment over three years does not apply to distributions paid to non-spouse beneficiaries), and only applies to those who met the requirements for being eligible to receive a coronavirus-related distribution.  With no net distribution after the rollover, there is nothing to report on Form 8915-E.  What you did was a repayment based on IRS Notice 2020-51, which has nothing to do with Form 8915-E.

[hullian]

Only passing along what I was told by the Turbotax "expert"...  🙂

[hullian]

>>>With no net distribution after the rollover, there is nothing to report on Form 8915-E.  What you did was a >>>repayment based on IRS Notice 2020-51.

Incorrect; there  WAS a net distribution. I initially took a distribution, but rolled over only about 1/3 of it. I kept the rest. It's showing on the 1099-R but not on the 1040.

[dmertz]

I should have just said that the portion rolled by a non-spouse beneficiary is not permitted to be reported on Form 8915-E.  Only the portion not rolled over is permitted to be reported on Form 8915-E and only for the purpose of spreading this income over three tax years by a beneficiary who was qualified to receive a coronavirus-related distribution.  If you did not qualify to receive a CRD, you are not permitted to use Form 8915-E for any purpose.

[hullian]

I think I "solved" my problem but I'm not sure how; I deleted my 1099-R completely (I thought) from Turbotax, and thought I would wait a while until all of the relevant updates had been made. But I got curious and opened the 1099-R Summary form. What I found was that even though I had deleted the 1099-R with the inherited IRA distribution, it STILL SHOWED on the 1099-R Summary Form. How can that be? Anyway, I edited the amount of the rollover on that form to be the correct amount. And then I re-input the 1099-R data through the step-by-step process. Lo and behold, the 1040 now CORRECTLY shows the rollover amount and correct taxable amount. Technically speaking, the 1040 is correct. But it really troubles me that even though I had deleted the 1099-R, the (incorrect) data stayed on the 1099-R Summary Form, which should also have been deleted. What is going on?????? It really makes me worry about the quality of this product.

[dmertz]

The 1099-R Summary doesn't have any editable fields without using overrides.

[hullian]

I see that you're right - still begs the question, why was ANYTHING showing in that field after I deleted that entire distribution 1099-R from Turbotax?  AND,  why overriding the 1099-Summary to the correct rollover amount was finally reflected correctly in the 1040, when it was NOT before I did the override, even though the rollover had been showing correctly on the 1099-R form? A Turbotax mystery (that will hopefully be fixed by February 12).........

[dmertz]

It's hard to imagine that there could be any value appearing on the 1099-R Summary that did not derive (correctly or incorrectly) from a 1099-R form that is still present in your tax return, except by override.

[cidutsay12]

It seems because of the Cares Act, Turbotax in its current status can't handle the case where a 1099-R form box A include both amounts that was converted to a Roth account and the RMD that was reverted  back to the IRA account from which it was distributed in the first place. Either our brokerages issue two corrected 1099-R forms, or Turbotax finds to way to deal with the situation in its future updates. 

[macuser_22]

This has nothing to do with the CARES act.

TurboTax has NEVER supported a singel 1099-R distributions to two destinations.

Situations not supported:

26.Form 1099-R --Distributions from Pensions, Annuities, Retirement orProfit-Sharing Plans, IRAs, Insurance Contracts, etc.: A single Form 1099-R rolled into multiple types of retirement plans (IRA, Roth IRA, other qualified retirement plan, etc.) is not supported. In this situation you must determine the amount rolled into each type of plan. Then treat each part of the rollover as a separate distribution and enter on multiple 1099-R worksheets.

You must split the 1099-R into two 1099-R's with the amounts going to each destination.    The amount converted on one and the amount rolled over on the other so the totals equal the original.

Only the resulting 1040 form gets sent to the IRS, the 1099-R worksheets in  TurboTax are just data entry screens and to not get sent to the IRS.

[MtnTABS]

My 2020 traditional IRA 1099-R totals $125,000 in Boxes 1and 2a. It is ALL taxable.  Can I split the 1099-R into two entries: $100,000 converted to a ROTH IRA and $25,000 as a regular distribution? The $25,000 does not show up on line 1040 4b as taxable no matter how many times I follow your step-by-step instructions. I made no nondeductible contributions, the IRA has no “ basis”, the $100,000 shows on Form 8606 Lines 16 and 18. I’ve never converted to a Roth until 2020; it is the only one I have. If I could make these into two separate entries I would think the $25,000 would finally land on 1040 Line 4b. It would also probably lower my $15,000 Federal tax refund! 🤣 (TurboTax Deluxe CD/Download Windows)

[VolvoGirl]

How much do you have on line 4b?  Actually it all should be taxable, all $125,000.  Converting to a ROTH IRA is a taxable event.   What code is in box 7 on the 1099R?  

[macuser_22]

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@MtnTABS wrote:

My 2020 traditional IRA 1099-R totals $125,000 in Boxes 1and 2a. It is ALL taxable.  Can I split the 1099-R into two entries: $100,000 converted to a ROTH IRA and $25,000 as a regular distribution? The $25,000 does not show up on line 1040 4b as taxable no matter how many times I follow your step-by-step instructions. I made no nondeductible contributions, the IRA has no “ basis”, the $100,000 shows on Form 8606 Lines 16 and 18. I’ve never converted to a Roth until 2020; it is the only one I have. If I could make these into two separate entries I would think the $25,000 would finally land on 1040 Line 4b. It would also probably lower my $15,000 Federal tax refund! 🤣 (TurboTax Deluxe CD/Download Windows)

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Yes you can, but but because you are doing 2 different things with the money, you must actually split the single 1099-R into two 1099-R's exactly  the same except box 1 and 2a on one put the amount taken in cash and tell TurboTax that you either took it in cash or rolled it over - whichever you did.

Enter the amount converted to a Roth in box 1 and 2a on the other 1099-R and tell TurboTax that you converted that to a Roth.

TurboTax does  not support doing two different things with a single 1099-R.