RMD process causes additional taxes if you have income tax withheld poolandgolf.

my 1099-R shows a required minimum distribution of $563.  Shows amount distributed as $563.   Shows amount withheld for taxes as $84.  I entered these figure in the Turbo Tax interview.   Turbo tax subtracted the $84 from the RMD of $563 and entered the amount actually distributed as $479. and additional tax (50% of $84) of $42.

This is a bug in Turbo Tax.

It is a subtle mistake since you cannot see all the forms until you print it out after efiling.
    The only way that I can see that you can get that result is that you answered the questions on the "Retirement Plan Distributions" screen incorrectly.

    The first question is: "[ ] You received the required minimum distribution for 2010"

    The second question is: "[ ] You did not receive the required minimum distribution for 2010"

    If you accidentally checked the 2nd question instead of the 1st, then the next screen asks for the 1) "Required distribution amount" and 2) "Amount actually received".

    If you entered the total received for #1 and the total minus the tax withheld for #2, then you will get the result that you are seeing.

    Any tax withheld is part of the RMD and should not be subtracted from it. For example if your total RMD was $5,000 and $500 tax was withheld, then your RMD was $5,000, not $4,500. If you said that the RMD amount was $5,000, but the amount actually received was only $4,500, then the $500 under-withdrawal would be subject to a 50% penalty and it would APPEAR that the TAX was being penalized - when in reality it is the incorrectly entered under-distribution that is being penalized.

    But if $5,000 was the correct amount for the RMD, then the first question "You received the required minimum distribution for 2010" should have been checked and the other screen would never be seen at all.

    You need to revisit the screens after the "1099-R Summary" screen and make sure that you check the first question and not the second.
    • To Macuser 22.  I just revisited TT Online and all questions were answered correctly.  Are you perhaps a Turbo Tax employee that can check out what I said?
    • No, just  volunteer TT user.

      You can contact TT here - but I think you said you already did in your other post.


      I really cannot see any other reason to see what you are seeing.   

      If the tax withheld was subtracted from the RMD, then the amount of the RMD would be too little by the amount of the tax, so that amount would show up as a 50% penalty.

      Is your 1099-R correct? - i.e. is the correct amount shown in box1, box 2a blank, box 2b checked, box 4 tax withheld, box 7 - code 7, and IRA/SEP/SIMPLE checked and you entered it like that?
    • Thanks macuser_22.  I double checked it after I saw what was submitted to the IRS and then just a little while ago.  I found one other person that had the same problem.  I had to submit an amended return.  I probably would not have caught the problem but for some reason I did a close check of the printed return.  I appreciate your comments, I do.
    • In addition is the amount on line 15b of your 1040 form the same as line 1 of your 1099-R?
    • macuser_22:  No, there was other IRA activity (IRA to Roth IRA), but the amount on line 50 of Form 5329 is the same,  then line 51 shows up as $479. Leaving $84 in line 52.  Creating $42 for additional tax in line 53. $84 is what was withheld.

      Line 51 is determined by Turbo Tax, not me.

      Tnx again.
    • I know I am getting old.  But I programmed computers for 26 years or so and fully understand how bugs can show up.  Kinda frustrating when I'm not included in the chain of command.  LOL.
    • I cannot understand how the amount got onto line 51 as it is a user entered (not calculated) amount and should only be able to get there by entering it during the interview.  TurboTax has no way of knowing what the amount of a RMD should be unless it is told.

      Sorry - I don't think I can suggest anything else.  At least you discovered it and amended to correct it.

      BTW - We have a lot in common - I retired after 30 years of computers/systems analyst. And I feel your frustration also.
    • To Macuser_22 I just went through the interview again.  After I enter the 1099 R information is entered.  Including the gross distribution and Federal Tax withheld, I then answered no to the Did youinherit this IRA. I then answered yes to the "Is this distribution a required minimum distribution ---". I then indicated it was A;; of this distribution was an RMD.  Then "None of this distribution was transferred to charity."  The I elected not not make a one time distribution.  Then back to the 1099-R summary.  

      I feel there are more people having the same problem but not aware of it.

      The one person I got to respond to this from Turbo Tax said he would pass it to the appropriate department and would pass on any thing he heard.   I have heard nothing yet, and that was over a month ago.
    • You stopped too soon.  The screens that ask about the RMD come two or three screens AFTER the 1099-R summary screen.  On the summary screen press DONE, then the next screen should ask if you ever made and nondeductible contributions to your IRA.  If you say no, and CONTINUE, the next screen asks the questions about your RMD and you should click on the first answer.
    • RE your link to conversation with TTAustin:  Perhaps there was a problem if they could reproduce and pass it to the developers.  Perhaps it has been fixed, because as of now, I can only reproduce your problem by the method I described.   There have been several updates since 3/26. (I have no way of knowing what was fixed or changed in the updates - I wish I did - one area of frustration :-)
    • You are right.  But I did check that my wife (shes the one requiring the RMD), took the required minimum distribution.  Sorry for leaving that out.  However, prior to that, there was a screen asking the value of all my IRA's.  I do not remember seeing that before. Hmmmm.
    • OK on that last entry. So I guess if it was fixed and I was not told, then I wouldn't know huh?  But if it is fixed, then that is my main concern.  Thanks a lot macuser.  Been nice conversing with you.
    • BTW- The screen asking about the total IRA value comes up after the screen asking if you have ever made a nondeductible contribution (basis) to your IRA.  If you have, you should be sure to enter it as it will lower the taxable amount of the distribution.  You need to do that both for your IRA's and your wife's as they cannot be combined.

      If I can find out anything about this problem being fixed I will post back, but I doubt that I can.
    • You are correct and no I haven't.  Thanks again.
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