H&R Block Not Treating Inherited IRA Distributions Correctly

[Trooper]

For users of H&R Block tax software (I am using Deluxe), the software currently excludes inherited IRA distributions from AGI.

The workaround is to change box 7 to "7" from "4". Hopefully a future update will fix this. After some googling I found I am not alone.

https://www.bogleheads.org/forum/viewtopic.php?t=418151

 

[athena53]

Thanks- I just realized I have the same problem. The amount I withdrew shows up but with 0 taxable. The code in Box 7 on my 1099 from Fidelity is already 4 and it does show the entire amount as taxable, which is correct. The software calculates zero taxable. I can override that but then I get a message that I won't be able to e-file. That's not good.

Yes, I hope they fix it.

 

[Qs Laptop]

Hmmm...I used H&R Block software for over a decade and switched to TurboTax the past two years. I was thinking of going back to H&R Block but now I'm not too sure. How do they get this sort of thing wrong?

 

[REWahoo]

Hmmm...I used H&R Block software for over a decade and switched to TurboTax the past two years. I was thinking of going back to H&R Block but now I'm not too sure. How do they get this sort of thing wrong?

The same way H&RB omits form 8911, "Alternative Fuel Vehicle Refueling Property Credit", from ALL versions of their personal software, for both 2022 and 2023 returns. This form is needed to calculate individual tax credits associated with the purchase and installation of home wiring and equipment to charge an EV.

I've boycotted TT since they pulled a sleazy stunt a few years back, when they quietly excluded items from their desktop software that was included in the same online version in an apparent attempt to force consumers to pay for an upgrade. Thanks to this repeated form 8911 omission from H&RB I've decided to end my boycott and purchase TT. Too bad I didn't discover H&RB's omission until after I purchased a copy of their 2023 software.

FWIW, yes, I do know I can manually enter the 8911 info into the H&RB software, but it will then not allow e-filing. I'm anticipating a nice refund due to a tax credit for the purchase of a HVAC heat pump system and do not want to have to wait months for the IRS to process my return.

 

[Trooper]

Hmmm...I used H&R Block software for over a decade and switched to TurboTax the past two years. I was thinking of going back to H&R Block but now I'm not too sure. How do they get this sort of thing wrong?

H&R Block has handled this correctly for the eight years I have been using their software, so I am confident there will be a fix. OTOH, not sure how it goes from working to not working LOL. Seems like it should have worked out of the chute - it's not like the tax law has changed with respect to this.

 

[imbatman]

Great find, this was calculated for me correctly last year so likely will be corrected, but a huge PIA to submit a corrected return. Brings up a good point though that I have always wondered. I know these products all come with "audit support and guarantee" type verbiage so I looked up the this one and not surprisingly

"Worry-Free Audit Support doesn’t include reimbursement of any taxes, penalties, or interest imposed by tax authorities"

So you'll likely have the option of some "enrolled agent" sending you email tips or listening to a meeting with you but all the rest of the pain is on you.

This doesn't totally jive with their "Guarantee" which says:

"If the H&R Block tax preparation software makes an error on your return, we will reimburse you for any resulting penalties and interest up to a maximum of $10,000."

 

[foxcreek9]

Great find, this was calculated for me correctly last year so likely will be corrected, but a huge PIA to submit a corrected return. Brings up a good point though that I have always wondered. I know these products all come with "audit support and guarantee" type verbiage so I looked up the this one and not surprisingly

"Worry-Free Audit Support doesn’t include reimbursement of any taxes, penalties, or interest imposed by tax authorities"

So you'll likely have the option of some "enrolled agent" sending you email tips or listening to a meeting with you but all the rest of the pain is on you.

This doesn't totally jive with their "Guarantee" which says:

"If the H&R Block tax preparation software makes an error on your return, we will reimburse you for any resulting penalties and interest up to a maximum of $10,000."

There is a difference in guaranteeing their calculations are correct (as discussed here) and the IRS challenging your assertions concerning a deduction or income.

 

[athena53]

This stuff happens. Years ago I found that TurboTax software was making an error in the AMT calculations. I just overrode the field and went on. I sent TurboTax an e-mail pointing out the error and was annoyed that they didn't respond at all. The IRS didn't flag any errors in my return so I assume I was correct.

I plan to e-file- after I waited MANY months for a substantial refund on my 2019 paper return (yeah, you know, COVID), my brother the tax accountant told me to ignore all the advice and e-file again. Refund arrived promptly. I suspect the paper is still sitting in a trailer somewhere.

Last resort: if they don't fix it I'll e-file with the incorrect number and then hold the extra money aside that I owe on the withdrawal (withdrawal was $7,000). If they get back to me and impose a penalty I'll see how good their guarantee is!

 

[GalaxyBoy]

Thanks for posting this. I’d been struggling to figure out why it wasn’t including my inhIRA RMD as taxable income. BTW, I’m using the Mac version of HRB Basic.

 

[jebmke]

For users of H&R Block tax software (I am using Deluxe), the software currently excludes inherited IRA distributions from AGI.

The workaround is to change box 7 to "7" from "4". Hopefully a future update will fix this. After some googling I found I am not alone.

https://www.bogleheads.org/forum/viewtopic.php?t=418151

Actually, I think the better workaround is to answer "no" when the software asks if this is an inherited IRA. I seem to recall when I did ours last year that that is what I did - and left Box 7 coded as "4."

 

[athena53]

Actually, I think the better workaround is to answer "no" when the software asks if this is an inherited IRA. I seem to recall when I did ours last year that that is what I did - and left Box 7 coded as "4."

Perfect! That works. I won't be filing anyway till I can download the brokerage forms, including this one from Fidelity. Right now I just have dummy forms labeled "Test". Hopefully the downloaded one will come through correctly or else H&R Block will get it fixed by then.

 

[GrayHare]

Re tax software guarantees, typically they require that you update the software as they release fixes. There was a significant bug a few years ago for which the fix did not happen until April 15...meaning the guarantee was not honored if you filed before the last few hours of that day.

 

[imbatman]

There is a difference in guaranteeing their calculations are correct (as discussed here) and the IRS challenging your assertions concerning a deduction or income.

Agree completely, and I would rather complete the software interviews accurately and have them "guarantee" any software errors.....than to answer incorrectly to artificially change the results and then maybe not have any "guarantee". Most likely won't matter for me as Fido never has my form available until late March / early April and one would think they would fix this by then.

 

[Al18]

According to HRBlock, there are many updates to their tax software that won’t be released until 2/2 or 2/16 https://www.hrblock.com/tax-software/updates-back-editions/federal-forms-available/

 

[gauss]

There are so many errors I have seen in tax-prep software. Last year I had to resort to doing the return in the tax-prep software, but then to actually file it, I had to re-enter the info in the IRS' Free-Fillable-Forms tool which allows efiling.

The way Free-Fillable-Forms work is that the tool does very few calculations (other than perhaps addition and copying results from schedules up to the main forms). This is good if you can't figure out a workaround in your chosen tax-prep software, but you still want to efile (and of course you know what the correct answer should be).

-gauss

 

[teejayevans]

Actually, I think the better workaround is to answer "no" when the software asks if this is an inherited IRA. I seem to recall when I did ours last year that that is what I did - and left Box 7 coded as "4."

I would think this is a bad idea, IRS gets copies of our 1099s and if there’s a mismatch it might flag the return.
I have to wait anyway, VG doesn’t put out taxable accounts IRS forms till February.

 

[athena53]

I would think this is a bad idea, IRS gets copies of our 1099s and if there’s a mismatch it might flag the return.
I have to wait anyway, VG doesn’t put out taxable accounts IRS forms till February.

I wouldn't be concerned about that. I'm waiting for the IRS to flag something on my 2022 taxes- I have a couple of "structured notes", an exotic vehicle I probably won't buy again, tied to a couple of stock indices. It makes periodic payments as long as both indices are above certain levels. When I did the brokerage form download they showed up as "Other Income" and a self-employment FICA tax was applied. It also counted a few of the payments twice. I overrode those values- I forget how but I used the correct number of payments and put them in a category that classed them as ordinary income. I have the brokerage year-end statement showing total income on those notes and will forward that if they send me a nasty letter.

 

[jebmke]

I would think this is a bad idea, IRS gets copies of our 1099s and if there’s a mismatch it might flag the return.
I have to wait anyway, VG doesn’t put out taxable accounts IRS forms till February.

That's the point. "4" is on the 1099-R correctly. Changing it to "7" would potentially (but not likely) cause a mismatch. My better solution is to lie to the software and tell it that it isn't an inherited IRA.

 

[jebmke]

There are so many errors I have seen in tax-prep software. Last year I had to resort to doing the return in the tax-prep software, but then to actually file it, I had to re-enter the info in the IRS' Free-Fillable-Forms tool which allows efiling.

The way Free-Fillable-Forms work is that the tool does very few calculations (other than perhaps addition and copying results from schedules up to the main forms). This is good if you can't figure out a workaround in your chosen tax-prep software, but you still want to efile (and of course you know what the correct answer should be).

-gauss

or do what I do and let the enthusiastic early filers find the errors and fix them.

 

[teejayevans]

I saw this and meant to research it, I was hoping tax free inherited IRAs was a result of recent tax changes.

 

[SecondCor521]

I saw this and meant to research it, I was hoping tax free inherited IRAs was a result of recent tax changes.

Nope, sorry.

 

[GalaxyBoy]

I saw this and meant to research it, I was hoping tax free inherited IRAs was a result of recent tax changes.

That crossed my mind and I did some minor research but then thought, "Naahhh!" Simply answering the question with "no, I didn't inherit this inherited IRA" does solve the problem. I'm a wee bit peeved that I wasn't paying attention late last year and I went over the top of my tax bracket with Roth conversions, but only by a small amount. My RMD was only a few thousand dollars.

 

[Interested Party]

Fix for H&R Block Issue with Inherited IRAs

I was on the phone with H&R Block for over 2 hours last week, and even told them the source of the problem. When you fill out the 1099 questionnaire for an inherited IRA, including the taxable amount of the distribution, that taxable amount is not being carried over to the form 1099 worksheet. On that worksheet there are two places the taxable amount can be placed. First at the top of the page, but that does nothing to change the 1040. Second, and most important, down the page under "IRA Distributions"..."B Inherited IRAs." Placing the Taxable amount in that block immediately carries over to the 1040 IRA Taxable Amount block which then properly gets included in Taxable Income.

Seems so simple, I can't believe it wasn't corrected in today's update.

Hope this helps.

 

[BOBOT]

Just (1/26) downloaded the latest update (Fed & State & Efile Deluxe).
Still not fixed.




Amended to say: Fix mentioned in IP's above post does seem to work, good catch. But shouldn't have to do it.

 

[jebmke]

Just (1/26) downloaded the latest update (Fed & State & Efile Deluxe).
Still not fixed.




Amended to say: Fix mentioned in IP's above post does seem to work, good catch. But shouldn't have to do it.

I predict it will not be fixed. It wasn't fixed last year so no reason to expect otherwise. I will continue to lie to the software to get the return correct. Won't be the first time (or the second time) and probably not the last time.