Roth Conversion confusion with spouse - possible bug

[RMenschel]

Given: TurboTax 2023 Home and Business, desktop, Windows 10, possible bug in 1099-R handling

• Primary taxpayer age 72, no RMD yet. Receives a pension. Takes no money from IRA’s except for IRA-to-Roth conversions.
• Spouse age 80, receives income from an annuity, takes an RMD from a single IRA.
• The following 1099-R information is in the order found within TurboTax:
• A: 1099-R for spouse, received $3,409 from annuity. 
• B: 1099-R for spouse, received 1,037.53 from trad rollover IRA, matching exactly RMD. "If Spouse's 1099-R, check this box" IS checked.
• C: 1099-R for taxpayer, received $15,135.64 from trad rollover IRA, all of which converted into a Roth, 100% taxable. No RMD required (not yet 73). "If Spouse's 1099-R, check this box" is NOT checked. Same institution as B, same federal tax ID for the institution, but different address.
• D: 1099-R for taxpayer, received 16,931.20 from trad rollover IRA (different institution than B and C), all of which converted into a Roth, 100% taxable, No RMD required. "If Spouse's 1099-R, check this box" is NOT checked.
• E: 1099-R for taxpayer, received $18,131 from pension. 
• While filling in the forms, TurboTax did ask about spouse RMD, and entered that all RMD had been taken (this is B).
• Since taxpayer is not yet of age, no RMD question asked.  
• However, when TT reviewed the return, it complained that C was converting too much money into the Roth. In the 1099-R worksheet for C, in the RMD section, TT had placed a value of 1,037 (the value of the spouse’s RMD in B, with cents stripped off). That value was then subtracted from the 15,135.64 distribution, resulting in an “error” indicating that 1,037 too much was placed into the Roth.
• Neither I (customer) nor TT phone support could find any reason for that 1,037 error.
• After much research and discussion, we manually zeroed out that RMD section in this 1099-R worksheet, and the error condition went away.

Theory: Something about the Spouse’s B having an RMD, and the taxpayer’s C not having an RMD, allowed the spouse’s 1,037 RMD to remain in a buffer when the C 1099-R was created. That 1,037 value was not replaced by the taxpayer’s entry, because the taxpayer had no RMD. I expect therefore this is a programming bug, which can be corrected by (re)initializing that RMD field whenever creating a new 1099-R worksheet.

[DianeW777]

If you would like to send us a “diagnostic” file that has your “numbers” but not your personal information it would help.  If you would like to do this, here are the instructions: 

TurboTax Online:

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number and your state. This will allow us to open a copy of your return without seeing any personal information.  

TurboTax CD/Download:

If you like, you can send a copy of your return that will be scrubbed to eliminate your personal data by using these steps:

1. Click on Online in the top left menu of TurboTax CD/Download for Windows
2. Select 'Send Tax File to Agent'
3. Write down or send an image of your token number and state then place in this issue.
4. We can then review your exact scenario for a solution.
5. Please also tell us any states included in the return. This is necessary for us to view the return.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution. 

[dmertz]

The results suggest that you indicated that distribution B was converted to Roth, which is not permitted to be done with an RMD.  I would delete and reenter the Form 1099-R for this distribution.