I took RMD money out of a qualified plan before the rule changed, then returned it. If I say it was an RMD, TT taxes it, even while giving a message saying (correctly) that it is not taxable!
True. And that's what I did. However, if I do check "RMD" (which it was at the time) and show it rolled over, TT correctly says it is not taxable, but goes ahead and includes it as a taxable amount!!!!
If money is taken out in the belief that it was an RMD, then properly rolled over, does TT should explain that the box "RMD" should not be checked.
The problem can be fixed easily by TT, either by instructing users not to check the RMD or not asking the question, as there were no required minimum distributions in 2020!
There is clearly a program error: If TurboTax states unequivocably that it is not taxable, then computes as if it were, it is an error. Moreover, TT says it is "rare" to be correct check "No". In fact, there may be many who took out RMDs before the law changed, and that would make it not, "Rare."
The proper fix is to explain in the 1099R input process is to state, "If an RMD or other distribution was taken during 2020 and later returned or rolled over pursuant to the 2020-only provision not requiring RMDs, you should check the "No" box."