Question

Shouldn't I be able to indicate that the inherited roth IRA is less than 5 years old (indicating it should be taxed)?

Forum|Forum|1 year ago
March 27, 2025
2 replies
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I inherited my deceased aunt's Roth IRA. I got a 1099R. Turbo tax asks me When did YOU (not the deceased relative) open a Roth IRA. There are 2 options and neither is the right option! It gives me choice A) you first opened a roth IRA BEFORE 2020 or b) you first opened a roth IRA DURING 2020. The true answer is she opened the roth IRA in 2022...so I am likely having to pay taxes but there is not an option to select that the roth was opened AFTER 2020.

AmyC

The laws changed in 2020. If you select opened during 2020, the program should calculate the amount as taxable income.

Your 1099-R box 7 code should be 4, this indicates inherited and helps the program know what to ask.

Reference: RMD for IRA beneficiaries

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D

dmertz

There was no law change in 2020 that affects the calculation of the taxable amount of a distribution from an inherited Roth IRA. A distribution from an inherited Roth IRA will have code T or code Q, not code 4.

Both the online and desktop versions of TurboTax fail to ask you to provide the taxable amount. This is a bug in TurboTax. TurboTax used to ask, but somewhere along the line this functionality got broken.

The only workaround that I can think of is if there is no tax withholding shown on the Form 1099-R you can use code 4 instead of code T, mark the IRA/SEP/SIMPLE box, then as you proceed through the questions that follow, indicate that your mother made nondeductible traditional IRA contributions and enter the taxable amount that you yourself calculated for this distribution From the Roth IRA. Because there is no tax withholding, the details of the code that you entered on TurboTax's 1099-R form will not be forwarded to the IRS with your e-filing.

Note that if you mother made a contribution to any Roth IRA for some year prior to 2020, the distribution from the inherited Roth IRA is a nontaxable qualified distribution and you don't need to worry about this TurboTax bug.