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Solved

Why does TurboTax ask for RMD for a pension?

Forum|Forum|7 years ago
February 3, 2019
6 replies
0 views

I received a 1099-R for a state pension distribution. After putting this form into TurboTax, it asked whether any of this distribution was for an RMD. Because I am older than 70.5 years, TT says I have to take an RMD for this account. I have no idea what the RMD is for this account. Because it is a pension, rather than an IRA, I don't think I have a previous year balance on which to compute a RMD value. I just get a monthly payment for life. What do I do?

Forms

Best answer by IsabellaG

All retirement accounts, which include IRAs and pensions, have to follow RMD rules once you reach 70.5 years of age.

To answer the question in TurboTax, you don't have to figure out your RMD. As long as you are receiving periodic payments, you can check yes, because the administrator of your plan has already calculated this. You would also say that all of the distribution is RMD.

NCPERSON1

please check that your inputs into Turbo Tax match EXACTLY to the form you have...esp. box 7 and the check box associated with that box,

somehow TT is thinking this is an IRA and not a pension ....box 7 controls that,

garyandjoanie

It works right. Check the box that says this is not an RMD. then follow the prompts. It works.

mglauner

You can answer YES to the RMD question when entering the 1099-R for your Pension. The Pension Administrators will be sure to send you the correct amount if you are over 70.5.

The answer does not go on your tax return.

Click the link for more info on RMD for Pensions.

IsabellaGAnswer

Employee

All retirement accounts, which include IRAs and pensions, have to follow RMD rules once you reach 70.5 years of age.

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BillKAuthor

Employee

Thank you for your assistance. I had filled in the form exactly as the paper copy showed, so that wasn't the problem. So, I said that this distribution covered all of my RMD, as you suggested, and I'm going to have faith that the IRS accepts that. What I don't understand is why TT doesn't explain the situation as you did. It seems as though they should ask about the periodic payments before asking about the RMD so that they know it is a pension instead of asking for information we don't have.

NCPERSON1

just out of curiosity, what letter / number is in Box 7 and is the check box next to it check or not (IRA / SEP)? I wonder if the issuer didn't fill out the form correctly?

I've entered plenty of these 1099 forms for my pension and i don't recall that RMD question coming up. (and I just tested it again - same result - the question is not asked).

My pension is coded as '7- normal' and I am not asked the RMD question. If I look at the 1099-R in 'forms' view, that question is left unanswered yet there is no error on my TT return.

BillKAuthor

Employee

After hours of research at IRS.gov and my pension's website, I now understand that TT has a fundamental flaw in processing this 1099-R. It turns out that my type of pension is a defined benefit plan, which is excluded from RMD withdrawals. Such a plan doesn't even have an end of year balance on which to compute an RMD. So, TT should never have asked whether the reported distributions were RMD withdrawals. In the preface to this question (titled "About This Retirement Account"), TT states that I "needed to take a required minimum amount of money … out of this account." That is a false claim and the reason why I became confused about this question. The technically correct answer is "No, none of this withdrawal was an RMD.", but I never would have guessed that from the incorrect information given in the preface. I will report this bug to TT through the link provided by NCperson.

macuser_22

Employee

That is not correct.

Virtually all pension plans, defined benefit plans, and annuities in existence today fall under section 401 of the tax code.

Required minimum distributions for defined benefit plans and annuity contracts all require RMD's after age 70 1/2. If you receive periodic (monthly) payments from any pension plan you can be assured that the custodian of the plan is meeting the requirements so you can safely answer "yes" to the question.

The rules that the plan administrator must use to calculate the RMD as required by §401(a)(9) are defined in § 1.401(a)(9)-6) of the Internal Revenue Code (IRC).

The answer to the question does not go on your tax return, it is simply to make sure you do not owe any penalty for not taking the RMD or use it for an ineligible rollover.

The question is just to be sure that the requirement was met.

https://ttlc.intuit.com/replies/3302117

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

MKS01

The RMD question does not appear if it is a non-qualifying account. Also, if you indicate that none of the payment was an RMD, you will eventually get a screen that allows you to indicate that you didn't need to take an RMD.

KarenM90

TurboTax includes this question, as the RMD rules apply to various types of accounts. Please note this list from the IRS publication (link included below)

Do these rules apply to my retirement plan?

These minimum distribution rules apply to:

traditional IRAs
SEP IRAs
SIMPLE IRAs
401(k) plans
403(b) plans
457(b) plans
profit-sharing plans
other defined contribution plans

As MKS01 indicated above, the on-screen prompts in TurboTax will give you the option for indicating that you did not need to take an RMD.

Link to IRS RMD Info: IRS.gov RMDs

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BillKAuthor

Employee

Thank you, KarenM90, for providing a reply. However, I think TT needs to do better in helping users know that their pension is a "defined benefit plan" that is not subject to RMD. When I ran into this problem last year, I had no idea what a defined benefit plan was or that my pension was such a plan. I had to do a lot of research on my pension's website to learn that it was a defined benefit plan. They didn't provide any information about RMDs or that they weren't required for this plan. So, I had to do a lot of research on IRS.gov to learn that RMDs don't apply here. After that, I struggled to find a way to correctly answer TT's questions. I didn't know that my answers weren't reported on my tax form. And the trick of saying that all of my distributions constituted the full RMD for this plan didn't occur to me and doesn't make sense anyhow. So, I think TT should probe further to determine if a pension is a defined benefit plan or at least to provide more information about whether an RMD applies to this pension.

MKS01

Despite my previous comments, defined benefit plans are in fact subject to RMDs. Even though the forms for the IRS may be the same by declaring no RMD is required for these plans, I agree with the response by IsabellaG that the withdrawal is an RMD.

Mike0749

For Pensions you always answer "Yes" to RMD question.