Turbotax INSISTS that an inherited IRA RMD qualifies for a 2017 disaster distribution and that a type be selected. Why, I answered "No" to qualified dist questions?

[Rexrandles]

An inherited IRA was created by my wife after the death of a parent in 2018.  An RMD distribution was taken by my wife in 2018 for the full amount of the RMD required. All of the distribution was the RMD. This was not a Qualified Disaster Distribution. "No" was checked when asked if this was a qualified distribution or if the distribution would be used for a home in a disaster area. Still, TurboTax insists that a disaster occurred in 2017 and that I select the Type of disaster (Hurricane, Wildfire, Hurricane and Wildfire.  I think this is a bug in the wizard, but I can't find a way to get around it.

[MarilynG · Accepted solution]

For 'type of disaster' leave the entry blank and Continue.  On the next screen do not check the box for 'I want to pay tax in 2018'. 

TurboTax asks several questions about Disaster Distributions for both 2016 and 2017, as the IRS implements the Disaster Relief Bill with special considerations for those who took distributions from their retirement plans in these areas.

Leave any entries blank (no $0's), except to indicate NO when asked if 'this was a qualified disaster distribution'.

If married, you will get the question for both spouses.

More info:

https://www.irs.gov/retirement-plans/disaster-relief-bill-includes-retirement-plan-distribution-and-...

[Rexrandles]

This was a GREAT help.  I did check a box to say that I wanted to pay taxes on this distribution this year (2018), but otherwise these instructions worked exactly as described and got me through what was a un-intuitive set of questions.  Thanks!

[klsajslll]

I hope someone can get through to TurboTax and ask about the problem.  I can't.  When I follow all of their advice, it doesn't include the money from the inherited IRA in the income.   I wonder when it will be fixed.

[Rexrandles]

I may stand corrected by a followon comment, but IMHO the money in a standard IRA ( this would include a standard inherited IRA) is not considered as income and taxable until a withdrawel [RMD] is made. Otherwise it continues to grow tax-free until a withdrawel is made.  I only declared the RMD as income, not the entire inherited IRA.

BTW, my understanding is that with an inherited IRA that the recepient of the IRA needs to check to see if they need to do a RMD each year regardless if they have reached the age of 70 1/2 yet. In our case the original owner of the IRA was way past 70 1/2; which now requires an RMD be taken every year on the Inherited IRA even though the recepient is not 70 1/2 yet.  The rules are probably different if the original owner had not reached 70 1/2 yet, but we didn't need to go figure that out.