Cares ACT RMD Reversal Snafu

[MtnTABS]

Only the Roth conversion money ($100,000) shows up in 4b; Box 7 has a 7 in it. Thanks for your response.

Another TT person has advised me that, yes, I can divide my 1099R into two entries: $100,000 in Boxes 1 and 2a for my traditional IRA to Roth Conversion and a second 1099R entry with $25,000 in Boxes 1 and 2a for the regular distribution. See her answer below your response in this thread. 🙏🏽 I am very hopeful that my weeks of solving problems is finally at an end. Tax returns for the year one loses a spouse are a nightmare. 

[MtnTABS]

Bless you for answering my question as I have been struggling with this for 10 days. It pays to read through the community messages until you find someone who solved a similar problem. Too bad it took me this long to find your answer from 2019 to another user but no one said doing tax returns was easy and Congress is working hard to make next year a bigger nightmare with higher tax rates, etc. 🤣 I bet answering TurboTax questions can be a nightmare!

P.S. When users click on a another user’s question in the “community” on, for example, page 5, I wish TT could fix it so that when we hit the “back” arrow we would be taken back to page 5 and not page 1. It takes much more time to scroll through 500 pages of messages when we continually get sent back to page 1. Food for thought.

[MtnTABS]

I did exactly as you indicated, deleted the 1099R, split it into two identical 1099Rs except for: $100,000 in Boxes 1 and 2a for the ROTH conversion, answered questions and an 8606-T was created with Part II completed. Part I is blank; $25,000 in Boxes 1 and 2a, indicated in questions that I took cash. The $25,000 STILL does not show on Line 4b! 

I went back, deleted the $25,000 1099R and started again. I carefully watched the Federal REFUND box at the top of my screen and as soon as I entered $25,000 into Boxes 1 and 2a, the refund went from $15,000+ to $9,000+. 👏 However......as soon as I checked ☑️ IRA/SEP/SIMPLE, the refund went back up to $15,000. If I don’t check the box and Continue to the next page it asks if I forgot to check the box. 

There is no “basis” in this IRA. It passed into my name when my husband died on 02/24/2020. He did not take a distribution from it in 2020. The 1099R is in my name and Box 7 has a 7 in it. What do you think is the problem? I did not contribute to the IRA. I did not mark this distribution as an RMD. Could the blank Part 1, Form 8606 have anything to do with this? 

[dmertz]

If marking the IRA/SEP/SIMPLE box results in a change in your refund, the only reason is that somehow TurboTax believes that you have basis in nondeductible traditional IRA contributions and is preparing Form 8606 on which the taxable amount is being calculated as $0.  Examine the IRA Information Worksheet.  Otherwise, click the Continue button on the page that lists the 1099-Rs that you've entered and proceed to the page that asks for your basis in nondeductible traditional IRA contributions to see what's there.

However,  if that was was the case, it seems that the taxable amount of the Roth conversion if entered by itself would be incorrect as well.

[MtnTABS]

When I input my 1099R as one entry covering both the Roth Conversion and the cash distribution, TT automatically generates a 8606-T filling in the Conversion amount correctly in the 8606 Part II and leaving Part I blank. This IRA passed to me from my husband in 2020 and he ran out of “Basis” on an 8606 in 2015 or 2016 thus no 8606s after that year; no basis left in it.

When I divide the 1099R into two entries, the exact same thing happens. I carefully examined the IRA Worksheet and all my entries show up properly except that $25,000 does not show as taxable at the bottom of the worksheet. At the top of the worksheet It is lumped into all my IRA distributions/conversion transferring from all boxes 1and 2a but at the bottom of my worksheet for this particular section, it leaves it out of the taxable amount. Same on Line 4b.

THREE HOURS LATER.....After reviewing, printing and reviewing hard copies of all the worksheets, Form 1099-R Summary, etc. I discovered that my other small IRA (all my own contributions deducted on our joint returns each year thus NO BASIS) is also not listed on Line 4b. The 2020 distribution Boxes 1 and 2a was just under $1,000, it has always been in my name, my first RMD was in 2019, the 1099R Box 7 is a 7 but if I remove the checkmark ✅ in the box for IRA/SEP/SIMPLE on the TT entry, the federal refund also goes down. What is happening? 

[MtnTABS]

yesterday

[Please note: In addition to the problem (below) you tried to help but the 1099R split didn’t work, I have also realized that a distribution from my other IRA for just under $1,000 is ALSO not on 1040 Line 4b.]

I did exactly as you indicated, deleted the 1099R, split it into two identical 1099Rs except for: $100,000 in Boxes 1 and 2a for the ROTH conversion, answered questions and an 8606-T was created with Part II completed; the other 1099R has $25,000 in Boxes 1 and 2a, and I indicated in questions that I took cash. I answered all the questions after Continue at the bottom of the 1099R screen. Unfortunately, the $25,000 STILL does not show on Line 4b! 

I went back, deleted the $25,000 1099R and entered it again. I carefully watched the Federal REFUND box at the top of my screen and as soon as I entered $25,000 into Boxes 1 and 2a, the refund went from $15,000+ to $9,000+. However......as soon as I checked IRA/SEP/SIMPLE, the refund went back up to $15,000. If I don’t check the box and Continue to the next page it asks if I forgot to check the box. 

There is no “basis” in this IRA. It passed into my name when my husband died on 02/24/2020. He did not take a distribution from it in 2020. The 1099R is in my name and Box 7 has a 7 in it. What do you think is the problem? I did not contribute to the IRA. I did not mark this distribution as an RMD. There has not been an 8606 in our returns since 2016 because there was never a basis in my IRA and my deceased husband’s basis ran down to zero in 2016. Neither of us have made any kind of contribution to anything since he retired in 1997 so TT cannot think I have a “basis”. IT IS ALL TAXABLE. Please help me figure this out so I can file after 33 days because I still haven’t started my state returns. 

[MtnTABS]

I did exactly as you indicated, deleted the 1099R, split it into two identical 1099Rs except for: $100,000 in Boxes 1 and 2a for the ROTH conversion, answered questions and an 8606-T was created with Part II completed; the other 1099R has $25,000 in Boxes 1 and 2a, and I indicated in questions that I took cash. I answered all the questions after Continue at the bottom of the 1099R screen. Unfortunately, the $25,000 STILL does not show on Line 4b! 

I went back, deleted the $25,000 1099R and entered it again. I carefully watched the Federal REFUND box at the top of my screen and as soon as I entered $25,000 into Boxes 1 and 2a, the refund went from $15,000+ to $9,000+. However......as soon as I checked IRA/SEP/SIMPLE, the refund went back up to $15,000. If I don’t check the box and Continue to the next page it asks if I forgot to check the box. 

There is no “basis” in this IRA. It passed into my name when my husband died on 02/24/2020. He did not take a distribution from it in 2020. The 1099R is in my name and Box 7 has a 7 in it. What do you think is the problem? I did not contribute to the IRA. I did not mark this distribution as an RMD. There has not been an 8606 in our returns since 2016 because there was never a basis in my IRA and my deceased husband’s basis ran down to zero in 2016. Neither of us have made any kind of contribution to anything since he retired in 1997 so TT cannot think I have a “basis”. IT IS ALL TAXABLE. Please help me figure this out so I can file after 33 days because I still haven’t started my state returns. 

[macuser_22]

You have introduced something new.    If the IRA is inherited with a code 4 in box 7 then by law, it is not eligible for a Roth conversion.     Anything moved to a Roth would be an excess contribution in the Roth subject to penalty.     

@dmertz ???

[MtnTABS]

My name is on the 1099R. Box 7 is a 7. I was my husband’s sole beneficiary and chose to treat his traditional IRA as my own after his death on 02/24/2020 by designating myself as the account owner. Here is the exact quote from the IRS: 

[Quote]
From IRS Pub. 590b:
What if You Inherit an IRA?
If you inherit a traditional IRA, you are called a beneficiary. A beneficiary can be any person or entity the owner choo- ses to receive the benefits of the IRA after he or she dies. Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive.
Inherited from spouse. If you inherit a traditional IRA from your spouse, you generally have the following three choices. You can:
1. Treat it as your own IRA by designating yourself as the account owner; [end quote]

This morning I decided to go back and look at our 2019 returns. When I efiled our returns for 2019, TT kept rejecting them because I was still listed on the returns as “spouse”. TT said I had to switch positions and be the “taxpayer” for 2019 even though my husband did not die until 02/24/20. Once I switched, our returns were accepted.

To my horror, this morning when I began to review the 1099Rs on the 2019 returns, I saw that because of switching my name at the beginning of the returns to “taxpayer”, automatically TT switched our names on our 1099Rs. No one warned me about that and it was my first time filing our returns.....my husband always did them on TT each year. Does this mean I have to amend our 2019 returns even though the total amounts do not change? On my hard copy of the 2019 return, all the IRS sees is my name and my husband’s name at the top of each page of the returns. The 1099Rs are not listed showing names so I don’t see how it would matter to the IRS that my internal worksheets have the names switched on 1099R. 

I think what I have is an internal TT problem in that when I loaded the new software for 2020, it auto filled our personal information from 2019 as is normal BUT since my name mistakenly appears on my husband’s IRA 1099R in the year when he was alive all year, is that somehow causing TT to refuse to tax my 1099R cash distributions for 2020? It still makes no sense why TT accepted the Roth Conversion and taxed it properly but refuses to tax the cash distribution especially since there is no basis on any IRA. It was taxable in 2019 and is also in 2020. 

[macuser_22]

You mentioned a 1099-R box 7 code 4 above. which is an inherited IRA.

  There may well be some carry-over information that is incorrect causing the problem.

Are you using the online version or CD/download desktop version? 

It is almost impossible to remove all of the "taxpayers" information from a prior joint return.   It is recommended to just start over with  fresh  single return.   Simply switching spouses does not change the embedded worksheets that would still contain your late spouses information and now apply it to you.

I would recommend to first delete all 1099-R's and then delete the "IRA Information Worksheet" and the "IRA Contribution Worksheet" to get rid of all carryover data.    Then re-enter the 1099-R's.

[MtnTABS]

That Box 7 code 4 was a teacher’s retirement IRA worth $5,000 so I took the money, closed the account and they deducted Federal taxes and sent me a check.

The traditional IRAs from which I took distributions in 2020 issued 1099-Rs in my name and Box 7 is a 7. If you reread my previous post, why, when I enter these two 1099-Rs .....if I leave the IRA/SEP/SIMPLE box unchecked ......the Federal refund window at the top of the screen falls to reflect that now it is taxing the funds? Toggling between empty box and checked box makes my refund go up and down by $5,500 which is approx. what I should be taxed. 

You said “Simply switching spouses does not change the embedded worksheets that would still contain your late spouses information and now apply it to you.” But it DID change all the 1099Rs! I’ve looked at each and also an OPM annuity CSA-1099. My name is on all his stuff and his name is on mine. Example: The 2019 return thinks I suddenly became the owner of a $3M traditional IRA when I didn’t become the owner until 2020. Wouldn’t these errors translate to the worksheets?

You said: “I would recommend to first delete all 1099-R's and then delete the "IRA Information Worksheet" and the "IRA Contribution Worksheet" to get rid of all carryover data.    Then re-enter the 1099-R's.”  By this do you mean I should remove all these forms in the 2020 return?  The software isn’t going to link back to 2019 somehow, someway? I will certainly try it. What if I followed the instructions for amending my 2019 return, put the correct names on all the 1099s etc.  Would that automatically adjust my ongoing 2020 return? Thanks again. 

Can my purchased TT Cd/Download be uploaded to more than one computer?

[macuser_22]

You can switch to the forms mode and view the "IRA Information Worksheet" that has the carryover 2019 information that is probably wrong now that you changed the "Taxpayers" name.   The carry over "Taxpayer" information is for the spouse that was listed first in 2019 - now you made yourself "Taxpayer" for 2020.    

Changing the name in the personal information section only changes the name on the 1099-R data entry screen.  When entering a 1099-R on a joint return you must indicate which spouse the 1099-R is for.    If the spouse you choose is the first named spouse in personal information the it goes under "Taxpayer",  

The best and correct approach is to just start a new tax return and do not transfer 2019 data into it, but enter everything fresh.     Simply changing the personal information name order can mess up lots of things

[MtnTABS]

I’ve confused you. I’m using TT Cd/Deluxe Windows.

When I loaded the software for 2019 returns, my husband was automatically populated as the “Taxpayer” from our 2018 return stored in the same computer. He always did the taxes but was deceased when I filed 2019 returns in July, 2020. When the 2019 return was rejected, I was told I must put my name as “Taxpayer” since he died 02/24/20 and I was filing a 2019 return just before the July, 2020 deadline. 

I went back into 2019 Personal Info at the beginning of the Step-by-Step process, changed my name to “Taxpayer”, his name to “Spouse” including correct social security numbers, changed the eFiling Pin to my PIN number. The 2019 returns were immediately accepted. I never looked at or changed any FORMS. I did not know that my becoming “Taxpayer” caused TT to automatically switch our names on all my other entries, too, such as 1099Rs. Why should that info have changed? I was specifically asked during Step-by-Step “Is this John’s or Jane’s 1099-R?” and I plainly indicated each time that his name was on his accounts, my name was on my accounts. 
TurboTax switched our names on FORMS. I did not. 

How do I start a fresh return without transferring the 2019 information? It does so automatically by virtue of the fact that all our returns are in the computer. How can I stop it from transferring the old information?

It also won’t address my problem of TT refusing to put my IRA cash distribution as taxable. Remember, no matter whose name was on this IRA in 2019, there was no “Basis” whatsoever to carry over into 2020. No FORM 8606 was in the 2019 return. Switching names does nothing to explain why TT will not put an IRA cash distribution on Line 4b when there is -0- tax basis to carryover from 2019. 

It took me two weeks to enter all our info on this 2020 return including an extremely long listing of all my husband’s clothing donated to charity. Each item of clothing has to be valued. The list of charitable cash contributions fills a page also. I end up with standard deductions being higher on Federal but I still have to itemize FIRST because itemizing is better when I get to my State return. 

[macuser_22]

I am rather sure that your "not showing as taxable" issue issue to the 2019 transfer of militated data because you switched the order of spouses.

Since I cannot see the actual files to analyze I can only guess as to what the problem is.

I suggested before to delete ALL 1099-R forms and then delete (in the forms mode) the "IRA information Worksheet" , and re-enter the 1099-R's and see if that fixes it.

If it does not, then the only suggestion is to start over with a new file.    When you start a new return the first question on the "Begin" screen is do you want to transfer from 2019 - say NO or you will just have the same problem again.

As far as the deductions, you sure that you have more than $24,800 ($27,400 if both over age 65) of deductions to itemize?    If not then it is  waste of time to enter them.

[MtnTABS]

You said:

“I suggested before to delete ALL 1099-R forms and then delete (in the forms mode) the "IRA information Worksheet" , and re-enter the 1099-R's and see if that fixes it.”

I deleted all 7 1099-Rs, deleted the IRA information worksheet, deleted a couple other forms that held 1099-R information. For good measure, I went back to the 2019 returns and made sure the correct names were atop the worksheets. 

This time I entered the $25,000 IRA distribution 1099-R first, watched the refund screen and it was finally TAXED! I entered the IRA %>Conversion to Roth 1099-R and it was taxed! Entered all the others, no problems. Next I checked the FORM 8606 and it was perfect for the first time in 34 days. No ❗️red exclamation indicating something was wrong. Roth Conversion shows in Part II as it should. Never thought I could be so happy to have $5,000 disappear from my refund!

I would pronounce you a genius for not giving up on me along with several others at TT but I’ll wait until the eFile is accepted. ;-D   I am stymied at the screen near the end where it has the Charitable Cares Act screen explaining the $300 deduction for joint returns. The entry box is shaded and displays my cash charitable donations total of $1,750. I am taking two standard deductions which is better for us than itemizing. Do I leave that box as is and just hit Continue Or do I override it and type in $300? After spending an hour reading up on this topic, it seems to be a nightmare causing a lot of rejected returns. Do I ignore the box and Continue or override the $1750 and type in $300? 

Thank you SO MUCH for your help and patience.