Inherited IRA and turbo tax question on RMDs

[eytonxav]

DW inherited her share of her aunts IRA (her brothers also received their shares) as the aunt passed away last year. DW took a total distribution of her share and had tax withheld which was reflected on the 1099R that she just received. We entered the distribution, taxes and code for death and reflected checked box for total distribution in Turbo Tax (TT). Now TT is asking the following questions:

Was this withdrawal an RMD?
check either: Yes, some or all was an RMD or No, none of this distribution was an RMD.

If answering yes to the above, TT asks Tell us how much of $distribution DW received applied to the RMD that was taken out:
check either: All of this distribution was an RMD or Part of this distribution was an RMD.

If you indicate part, TT wants you to enter how much received applies to the RMD?


I am really confused by this since DW elected to take a total distribution, so RMDs do not even seem to be applicable. Does anyone have experience in how to answer for this situation? I may have to call the Bank to find out what part of distribution was an RMD, but it still seems irrelevant given she received a total distribution and paid tax on the total.

 

[Souschef]

If you take a total distribution, the RMD does not apply. The answer to Turbotax is no, not yes.
The RMD only applies as a requirement to take out a percentage based on age. The key word is minimum.
Your wife took a total distribution and the 1099 should be coded as "4" which is Death.

 

[eytonxav]

If you take a total distribution, the RMD does not apply. The answer to Turbotax is no, not yes.
The RMD only applies as a requirement to take out a percentage based on age. The key word is minimum.
Your wife took a total distribution and the 1099 should be coded as "4" which is Death.

Thanks, the reason I am confused by this, there was a Q&A on TT for a similar situation where it indicated to show the entire distribution as being an RMD since it was a total liquidation. Very confusing. I would have thought that the RMD line of questions would have been suppressed by TT since the 1099 contained box reflecting death code and total distribution, which was initially entered into TT before these RMD questions popped up.

 

[LOL!]

Was Aunt (deceased) required to take a RMD? If so, then her RMD needs to be satisfied. Maybe she took her RMD before she passed away? If not, then the RMD could be satisfied by one or more withdrawals made by the heirs. It is also possible that the OPs withdrawal was not enough to satisfy the RMD.

Perhaps it is time to read some IRS instructions and do more research about RMDs from freshly inherited non-spousal IRAs?

 

[target2019]

Is total distribution box 2b checked off on the 1099-R?

 

[eytonxav]

Was Aunt (deceased) required to take a RMD? If so, then her RMD needs to be satisfied. Maybe she took her RMD before she passed away? If not, then the RMD could be satisfied by one or more withdrawals made by the heirs. It is also possible that the OPs withdrawal was not enough to satisfy the RMD.

Perhaps it is time to read some IRS instructions and do more research about RMDs from freshly inherited non-spousal IRAs?

Her Aunt was 90 yo, so I am sure she must have of had a required distribution, but I have no idea if she did since she died in early January. Any how, this was the inherited portion and I believe RMD then become subject to inheritance rules and that may depend on DWs age, but again, it seems logical since DW elected no RMD and just a total distribution, this RMD line of questioning should not apply.

 

[eytonxav]

Is total distribution box 2b checked off on the 1099-R?

Yes, and that was also entered into TT.

 

[LOL!]

Her Aunt was 90 yo, so I am sure she must have of had a required distribution, but I have no idea if she did since she died in early January. Any how, this was the inherited portion and I believe RMD then become subject to inheritance rules and that may depend on DWs age, but again, it seems logical since DW elected no RMD and just a total distribution, this RMD line of questioning should not apply.

Actually, this RMD line of questioning absolutely should apply. Read the rules.

TT could easily know about this since previous questions were asked in the EasyStep interview: Date of death, age of deceased, etc. So TT is trying to prevent your spouse from making a tax mistake.

At age 90, the RMD would be a substantial fraction of the IRA. It is easy to find out if the deceased took their RMD, but because date of death was so early in the year, it is unlikely. Thus the beneficiaries are responsible for taking her RMD.


Note that if the RMD was less than the amount your spouse withdrew, then that's good enough, but if the amount your spouse withdrew was less than the RMD, then the other beneficiaries should have taken enough from their shares to satisfy the RMD.

This discussion may be helpful: https://www.bogleheads.org/forum/viewtopic.php?t=127077

Full disclosre: I received an inherited IRA from my mom She had not taken her RMD. The heirs had to make sure her RMD was fulfilled.

 

[Souschef]

IMO, all this discussion about RMD's is interesting, and would apply if she did not take a total distribution. At age 90, the RMD is about 8%. His wife took 100% as a total distribution.

 

[eytonxav]

Actually, this RMD line of questioning absolutely should apply. Read the rules.

TT could easily know about this since previous questions were asked in the EasyStep interview: Date of death, age of deceased, etc. So TT is trying to prevent your spouse from making a tax mistake.


Note that if the RMD was less than the amount your spouse withdrew, then that's good enough, but if the amount your spouse withdrew was less than the RMD, then the other beneficiaries should have taken enough from their shares to satisfy the RMD.

This discussion may be helpful: https://www.bogleheads.org/forum/viewtopic.php?t=127077

Full disclosre: I received an inherited IRA from my mom She had not taken her RMD. The heirs had to make sure her RMD was fulfilled.

Thanks, actually TT did not ask any questions about date of death, but just wanted to know if deceased was born before 1941 which was the case. DW received paperwork last year that gave her the option to take periodic distribution from this IRA or a lump sum total, she took the lump sum total and elected to have 15% withheld. The 1099R reflects this. I need to do some more research and possibly get help from a tax expert, as this RMD aspect is not at all clear to me.

 

[LOL!]

She took a total distribution of her share. If her share was more than the decedent's RMD, then great. She should tell her co-beneficiaries to let them know that her withdrawal covered the decedent's RMD. TT wants to know as well because it would calculate the penalty for not taking the decedent's required minimum distribution.

I think the link to the bogleheads discussion is clear enough that you will not need to get tax advice on this as it does appear that the decedent's RMD was satisfied if your spouse received more than 8% (10%?) of the IRA.

In my case, my mom's IRA had about 7 beneficiaries, so each one got only about 15% of the pie and the RMD was about that large, too.

 

[target2019]

Get out of the interview mode, and look at the forms. In the left pane look for errors. Find each form involved, so that the flow of information is clearer to you.

 

[eytonxav]

Thanks everyone. I found this reply in the TT Q&A which seems to fit DW's situation the more I think about it, so I am just going to indicate that the RMD was fully satisfied to make TT happy. DW's distribution was way more than 8-10% of her aunts original IRA value:

https://ttlc.intuit.com/questions/2...from-an-ira-how-do-i-answer-the-rmd-questions