RMD Penalty

[jeangear]

I have five IRA annuities.  On four I took more RMD than was required.  On the fifth one I took less than was shown for that RMD.  However, the total that I withdrew came to a little over the total that was required for all five.  And yet, Turbotax is showing that I owe a penalty of over $400 tax on excess accumulations in my retirement account after I enter that fifth RMD.  If the total is covered why would I be penalized?

[DavidD66]

If you are confident that you have taken enough in distributions to satisfy your RMD for all of your combined IRAs, then you can answer No to the question "How much of the $[Distribution Amount] was an RMD?" for each distribution.  The program will not ask any additional RMD questions.  Nor will it calculate a penalty for taking your required RMD. 

[jeangear]

It would not let me answer No.  I could only enter an amount.  I finally talked to someone. After a full hour on the phone she finally talked to someone else who said there was a "known software problem" and I would be contacted when it was fixed.  I waited six days with no contact, then called again.  Talked to Greg.  He saw that there was a problem and I should not be charged the $404 tax penalty.  He said he was transferring me to a tax specialist to see if there was a work-around so the tax penalty could be removed.  I also asked that the higher charge for Live Premium be changed back to the original $89 since the problem was software and not my fault.  

I assumed that during the time I was on hold Greg was talking to a specialist about what the problem was.  When she finally came on, she didn't go over any of it with me.  She just said it was fixed and I would not have a penalty, and that she had given me a credit for the higher Turbotax charge.  She could see my screen and was telling me what to do.  I finally realized that she was just walking me through finishing and filing the return.  I told her I wasn't comfortable with filing because I wasn't sure the tax penalty had been removed.        She assured me that there was no penalty and I could file.  I took her word for it and filed.  Afterward, I printed out my tax return and the tax penalty was still there!!!  And the Turbotax charge showed a total of $199.  What do I do now?

[DanaB27]

Try to click continue after you entered all your Form 1099-Rs and answer "Yes" on the "Let's check if you met the minimum distribution requirement" screen.

If that doesn't work you can you try to delete and reenter the Form 1099-Rs:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R” 
4. On the "Your 1099-R Entries" screen click delete all Form 1099-R and reenter them
5. Continue until "How much of the $XXXXX was a RMD?" screen, select "The entire distribution was an RMD" (or select "Only part of this distribution was a RMD" and enter the amount of RMD) and click "Continue".
6. On the "Let's get more information about your Required Minimum Distribution (RMD)" screen enter the amount of the RMD from this distribution again.
7. On the "Your 1099-R Entries" screen click "continue"
8. On the "Let's check if you met the minimum distribution requirement" screen answer "Yes" since you took all necessary RMD

[jeangear]

That is exactly what I did in the first place.  Even though it literally showed in my totals that I had taken more in RMD than was required, it still had a $404 tax penalty for not taking enough.  I have been told that there is a problem in TurboTax software.

[DanaB27]

The RMD section has been updated after I posted my last reply. Please go back to your 1099-R entry and review the follow-up questions. At the end of the interview you should be able to select that you took all of your RMD.

Please follow these steps in TurboTax Online:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R” and enter your 1099-R
4. Continue until "How much of the $XXXXX was a RMD?" screen and select "Only part of this distribution was a RMD" and enter the amount of RMD /or select "The entire distribution was an RMD" (if this distribution includes RMD for other IRA accounts then you included the amount here)
5. Enter the RMD amount for this account on the "Let's get more information about your Required Minimum Distribution (RMD)" screen
6. On the "Review your 1099-R info" screen click "Continue"
7. On the "Did You Miss a Required Distribution From Any Retirement Accounts?" screen select "None of these plans failed to withdraw the RMD" if you met all of your RMD for 2024, otherwise select what is applicable. 

In TurboTax Desktop:

1. Click on "Search" on the top right and type “1099-R”
2. Click on “Jump to 1099-R” and enter your 1099-R
3. On the "Required Minimum Distribution" screen enter RMD for this account 
4. On the "How much of This Distribution Applied to your December 31, 2024 RMD" select "Some of this distribution…" and enter the RMD amount / or select "The entire distribution applied…"  (if this distribution includes RMD for other IRA accounts then you included the amount here)
5. On the "Your 1099-R Entries" screen click "Continue"
6. On the "Did You Miss a Required Distribution From Any Retirement Accounts?" screen select "None of these plans failed to withdraw the RMD" if you met all of your RMD for 2024, otherwise select what is applicable. 

@jeangear 

[tcsmith22]

There appears to be an issue with TurboTax calculating RMD for each distribution in isolation, rather than in aggregate as IRS rules allow. This post: https://ttlc.intuit.com/community/retirement/discussion/multiple-ira-rmd-and-actually-distrib[produc... says, "Our programmers are currently working to improve the RMD section experience.  Be sure to sign up for email updates here: Why am I getting an RMD distribution amount error?"

[wbd1051]

My return was good and ready to file and then I did a TT update and was charged a RMD tax. It took me a while to find the problem, but it was due to TT rounding up the RMD amount deducted but then did not round up on the next screen when ask "Amount applicable to 2024 RMD". I rounded this number up like TT did and my refund was corrected. TT needs a place to report software problems without having to pay. I have used TT over 10 years but may have to change next year.