I received a 1099-R for a state pension distribution. After putting this form into TurboTax, it asked whether any of this distribution was for an RMD. Because I am older than 70.5 years, TT says I have to take an RMD for this account. I have no idea what the RMD is for this account. Because it is a pension, rather than an IRA, I don't think I have a previous year balance on which to compute a RMD value. I just get a monthly payment for life. What do I do?
All retirement accounts, which include IRAs and pensions, have to follow RMD rules once you reach 70.5 years of age.
To answer the question in TurboTax, you don't have to figure out your RMD. As long as you are receiving periodic payments, you can check yes, because the administrator of your plan has already calculated this. You would also say that all of the distribution is RMD.
After hours of research at IRS.gov and my pension's website, I now understand that TT has a fundamental flaw in processing this 1099-R. It turns out that my type of pension is a defined benefit plan, which is excluded from RMD withdrawals. Such a plan doesn't even have an end of year balance on which to compute an RMD. So, TT should never have asked whether the reported distributions were RMD withdrawals. In the preface to this question (titled "About This Retirement Account"), TT states that I "needed to take a required minimum amount of money … out of this account." That is a false claim and the reason why I became confused about this question. The technically correct answer is "No, none of this withdrawal was an RMD.", but I never would have guessed that from the incorrect information given in the preface. I will report this bug to TT through the link provided by NCperson.
please check that your inputs into Turbo Tax match EXACTLY to the form you have...esp. box 7 and the check box associated with that box,
somehow TT is thinking this is an IRA and not a pension ....box 7 controls that,
All retirement accounts, which include IRAs and pensions, have to follow RMD rules once you reach 70.5 years of age.
To answer the question in TurboTax, you don't have to figure out your RMD. As long as you are receiving periodic payments, you can check yes, because the administrator of your plan has already calculated this. You would also say that all of the distribution is RMD.
Thank you for your assistance. I had filled in the form exactly as the paper copy showed, so that wasn't the problem. So, I said that this distribution covered all of my RMD, as you suggested, and I'm going to have faith that the IRS accepts that. What I don't understand is why TT doesn't explain the situation as you did. It seems as though they should ask about the periodic payments before asking about the RMD so that they know it is a pension instead of asking for information we don't have.
just out of curiosity, what letter / number is in Box 7 and is the check box next to it check or not (IRA / SEP)? I wonder if the issuer didn't fill out the form correctly?
I've entered plenty of these 1099 forms for my pension and i don't recall that RMD question coming up. (and I just tested it again - same result - the question is not asked).
My pension is coded as '7- normal' and I am not asked the RMD question. If I look at the 1099-R in 'forms' view, that question is left unanswered yet there is no error on my TT return.
@NCperson wrote:just out of curiosity, what letter / number is in Box 7 and is the check box next to it check or not (IRA / SEP)? I wonder if the issuer didn't fill out the form correctly?
I've entered plenty of these 1099 forms for my pension and i don't recall that RMD question coming up. (and I just tested it again - same result - the question is not asked).
My pension is coded as '7- normal' and I am not asked the RMD question. If I look at the 1099-R in 'forms' view, that question is left unanswered yet there is no error on my TT return.
Box 7 has the code of "7-normal" and the IRA/SEP box is NOT checked. I would assume that identifies this is a pension. Last year, I didn't have any questions about an RMD for this account, so I was surprised to see them this year. However, there is an intervening question that I don't recall from last year. It comes after comes up after I confirm the IRA/SEP box is not checked and I state that this plan didn't come from being a public safety officer. That question asks "Where is this distribution from?". The answers are "Federal govt pension", "AZ state or local govt pension" (which is what I selected), a couple other AZ entities, other forms of public employment, or "None of the above". Maybe my recollection is poor, but I don't remember having to identify this as an Arizona state pension last year. So, perhaps there is a bug in the program related to being an AZ pension that non-Arizona users don't encounter. Anyhow, how can I alert TT about this issue? They really shouldn't be freaking out their customers by asking about RMD information when it is unknown and doesn't apply.
I think you are on to something..
that screen you reference with the AZ question is where TT asks questions that effect state returns (my questions on that screen are specific to the state I live in). TT is determining that the pension is from AZ and since you already stated you are a AZ resident, TT knows to deduct $2500 that is available for AZ residents for AZ pension payments.
My next screen asks whether the distribution is from a qualified plan. The question of RMD does not appear. (my box 7 is 'normal')
However, if Box 7 is '4-death' (which for another family member under a separate return who is the surviving spouse of a pensioner), that RMD question indeed appears after the state specific screen.
anyway, reporting bugs:
https://ttlc.intuit.com/questions/4512589-how-to-i-report-bugs
The RMD question comes up for any pension when you reach the age 70.5. It also comes up in death distributions, because an RMD is required.
that is consistent with my experience; family members under 70.5 (box 7 - normal) do not see the question, but those over 70.5 do (box 7 : 4-- death)
After hours of research at IRS.gov and my pension's website, I now understand that TT has a fundamental flaw in processing this 1099-R. It turns out that my type of pension is a defined benefit plan, which is excluded from RMD withdrawals. Such a plan doesn't even have an end of year balance on which to compute an RMD. So, TT should never have asked whether the reported distributions were RMD withdrawals. In the preface to this question (titled "About This Retirement Account"), TT states that I "needed to take a required minimum amount of money … out of this account." That is a false claim and the reason why I became confused about this question. The technically correct answer is "No, none of this withdrawal was an RMD.", but I never would have guessed that from the incorrect information given in the preface. I will report this bug to TT through the link provided by NCperson.
That is not correct.
Virtually all pension plans, defined benefit plans, and annuities in existence today fall under section 401 of the tax code.
Required minimum distributions for defined benefit plans and annuity contracts all require RMD's after age 70 1/2. If you receive periodic (monthly) payments from any pension plan you can be assured that the custodian of the plan is meeting the requirements so you can safely answer "yes" to the question.
The rules that the plan administrator must use to calculate the RMD as required by §401(a)(9) are defined in § 1.401(a)(9)-6) of the Internal Revenue Code (IRC).
The answer to the question does not go on your tax return, it is simply to make sure you do not owe any penalty for not taking the RMD or use it for an ineligible rollover.
The question is just to be sure that the requirement was met.
https://ttlc.intuit.com/replies/3302117
It works right. Check the box that says this is not an RMD. then follow the prompts. It works.
You can answer YES to the RMD question when entering the 1099-R for your Pension. The Pension Administrators will be sure to send you the correct amount if you are over 70.5.
The answer does not go on your tax return.
Click the link for more info on RMD for Pensions.
The RMD question does not appear if it is a non-qualifying account. Also, if you indicate that none of the payment was an RMD, you will eventually get a screen that allows you to indicate that you didn't need to take an RMD.
TurboTax includes this question, as the RMD rules apply to various types of accounts. Please note this list from the IRS publication (link included below)
Do these rules apply to my retirement plan?
These minimum distribution rules apply to:
As MKS01 indicated above, the on-screen prompts in TurboTax will give you the option for indicating that you did not need to take an RMD.
Link to IRS RMD Info: IRS.gov RMDs
Despite my previous comments, defined benefit plans are in fact subject to RMDs. Even though the forms for the IRS may be the same by declaring no RMD is required for these plans, I agree with the response by IsabellaG that the withdrawal is an RMD.
Thank you, KarenM90, for providing a reply. However, I think TT needs to do better in helping users know that their pension is a "defined benefit plan" that is not subject to RMD. When I ran into this problem last year, I had no idea what a defined benefit plan was or that my pension was such a plan. I had to do a lot of research on my pension's website to learn that it was a defined benefit plan. They didn't provide any information about RMDs or that they weren't required for this plan. So, I had to do a lot of research on IRS.gov to learn that RMDs don't apply here. After that, I struggled to find a way to correctly answer TT's questions. I didn't know that my answers weren't reported on my tax form. And the trick of saying that all of my distributions constituted the full RMD for this plan didn't occur to me and doesn't make sense anyhow. So, I think TT should probe further to determine if a pension is a defined benefit plan or at least to provide more information about whether an RMD applies to this pension.
This issue/question has come up EVERY year since I have been answering questions here (since 2009) and TurboTax is not going to change it. TurboTax will ask the question blindly for ANY 1099-R if you age is 70 1/2 or more.
Virtually all pension plans, defined contribution plans, and annuities in existence today fall under section 401 of the tax code.
Required minimum distributions for defined benefit plans and annuity contracts all require RMD's after age 70 1/2. If you receive periodic (monthly) payments from any pension plan you can be assured that the custodian of the plan is meeting the requirements so you can safely answer "yes" to the question.
The rules that the plan administrator must use to calculate the RMD as required by §401(a)(9) are defined in § 1.401(a)(9)-6) of the Internal Revenue Code (IRC).
The answer to the question does not go on your tax return, it is simply to make sure you do not owe any penalty for not taking the RMD or use it for an ineligible rollover.
The question is just to be sure that the requirement was met.
https://ttlc.intuit.com/replies/3302117
macuser_22,
I think you have missed some of the fine print in the IRS rules about RMDs. KarenM90 quoted the IRS list of retirement plans that require an RMD (and she gave a link to the relevant IRS publication). This list includes defined contribution plans but NOT defined benefit plans. So, I think TT is flawed in not asking if my pension is a defined benefit plan and requiring me to report an RMD. I buy TT so that it will lead me through complex tax issues such as this. I think TT has failed me on this issue, and I think it wouldn't be so hard for the programmer's to put in more help for people like me.
Defined benefit plans are almost non-existent today. Almost all retirement plans today are defined contribution plans (I will change my above post accordingly - then was my mistake).
But in any event you are NOT required to *report* ANY RMD. Nothing about a RMD whatsoever goes on a tax return. The ONLY purpose of the question is to protect you from not taking it if you are required to do so. (And not allowing any part of a RMD to be rolled over).
I agree completely that there are some situations that the questions simply does not apply to, but this has gone to the TurboTax developers more times that I can remember, over many years, and they always decline to change anything.
The responses on this have been very confusing, so I'm not surprised that TT hears about it every year. I called my pension custodian (Prudential) and was told by the first person I talked to "Ask your professional tax advisor." No one could confirm or not that an RMD was being taken out (although another person from Prudential is supposed to call me back). If I tell TT "Yes", then I have to say how much of my annual distribution was an RMD, which I have no way of knowing.
At this point to move on, just indicate that all of the pension distribution is an RMD amount. This will not significantly impact your tax return just as long as the IRS is reasonably sure you are taking your RMD distributions.
@emosteve5 wrote:
The responses on this have been very confusing, so I'm not surprised that TT hears about it every year. I called my pension custodian (Prudential) and was told by the first person I talked to "Ask your professional tax advisor." No one could confirm or not that an RMD was being taken out (although another person from Prudential is supposed to call me back). If I tell TT "Yes", then I have to say how much of my annual distribution was an RMD, which I have no way of knowing.
For one thing, there is NOTHING whatsoever on a 1099-R that identifies any distribution as a "pension" so TurboTax has no way to know what the 1099-R is for. Rather than have a lengthy interview that would be just as confusing, TurboTax just asks the RMD question for any 1099-R when age 70 1/2 or more. If you know that the 1099-R is for a pension then it is automatically all a RMD since that is a requirement of the pension trustee, but it is indeed a RMD.