Software bug: data filed linking betwen 1099R and 1040

Forum|Forum|2 years ago
February 19, 2024
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there is a Turbotax software bug which mistakenly links 1099R-Line1(gross distrib) into 1040-Line4a(taxable amount), instead of 1040-Line4b(taxable amount) as it should.

Note: In most of 1099R,box-1 and box-2a have the same number/amount so that this bug usually has not been noticed.

Technical Help

Best answer by dmertz

dmertz,

Thank you so much for a good idea about form 4852.

By the way, I have already filed a form 5329 (to waive penalty for missing 2022RMD) along with 2022 1040 return in April 2023.

Now the company admitted that there is an adjustment for 2022 tax year but declined to issue a corrected 2023 1099R, and just asked me to modify the taxable amount with explanation and supporting docs.

There are two options without filing amended 2022 return to avoid double-taxation:

1. In the 2023 1099R, I manually modify the taxable amount with explanation. Review of Turbotax shows no error.

2. Add 2023 form 4852 to report corrected taxable amount (do I need to delete the 2023 1099R from the company in Turbotax?)

Thanks,

--wc

#2 is the method that you are to use to implement #1, so there is really only one option.

When using Form 4852, you enter the Form 1099-R marked as a substitute form instead of entering the form as provided by the payer.

dmertz

Employee

There is no bug. If the taxable amount of an IRA distribution is less than the full gross amount due to some portion being rolled over, contributed to charity as a qualified charitable deduction, transferred to an HSA or a portion is nontaxable due to having basis in nondeductible traditional IRA contributions, the gross amount is required to be included on line 4a but only the taxable amount is included on line 4b. Only the taxable amount of this income on line 4b adds to your AGI and affects the rest of your tax return.

wc158Author

dmertz,

thank you for response. What you described is the correct principles the tax forms are designed for. Unfortunately a possible linking bug breaks the logic process.

Just a simple test can show the case: in Turbotax Deluxe, 1) Go "FORMS" 2) Open/create a form 1099R, (make sure at box 7: sub-box”IRA/SEP/SIMPLE” checked ) then input "4000" to box 1(Gross distribution),and "2000" to box 2a(taxable amount) 3) Then open the form 1040, check the value in box 4b(taxable amount). It should be "2000" not "4000". i.e. 1040 box-4b should be linked to 1099R box-2a, not box-1.

Note: In most of 1099Rs,box-1 and box-2a have the same amount so that this bug usually has not been noticed.

dmertz

Employee

TurboTax is behaving correctly. Except in the case where the Form 1099-R is reporting a return of contribution after the due date of the tax return, the instructions for Form 1099-R require that box 2a of a Form 1099-R with code 1, 2 or 7 in box 7 and the IRA/SEP/SIMPLE have box 2a equal to box 1, so TurboTax properly uses the amount in box 1 to avoid problems with a Form 1099-R where the form has a different amount in box 2a.

You must enter the Form 1099-R as received. If the taxable amount is less than the amount in box 1 due to having basis in nondeductible traditional IRA contributions, the taxable amount is determined on Form 8606, not on the Form 1099-R. Be sure to click the Continue button on the page that lists the Forms 1099-R that you have entered and answer any additional questions that TurboTax presents regarding your basis and year-end value in traditional IRAs.