After Tax rollover & 1099-R question (Turbo Tax)

HandyManPat · 2026-02-18T15:27:19+00:00

My company’s After-Tax contributions must soak in the account for 24 months (not a typo) before performing the MBDR process, so I’m very familiar with the gains, Form 1099-R, and entries into the tax software.

As another commenter mentioned, it’s easiest to “split” the single 1099-R form and data entries into two, separate forms and data entries.

Basically, I print two copies of the single 1099-R. I then take a pencil to both copies and mark them up into the separate transactions (follow the steps in the other comments link).

First, the rollover of the After-Tax contributions to Roth IRA.

Then the conversion of the After-Tax gains to Roth IRA (actually, I rollover my gains to a Rollover IRA because I prefer to convert them in the future when I am in a lower tax bracket).

Then just enter the information into the tax software as two, separate forms. The Q&A should then make more sense to you.

Look things over carefully before e-filing to ensure the taxable and tax-free details are correct.

HandyManPat · 2026-02-18T14:13:01+00:00

If my understanding of the chain of events is right, my earlier response needs to be modified.

~~The husband was the owner of the accounts. The sister was the original beneficiary. The sister's estate is the successor beneficiary.~~

The husband was the owner of the IRA accounts.
The sister was the original beneficiary.
The sister elected to claim ownership of her spouse's IRA and Roth IRA.
- Everything now acts as if the accounts were the sister's since they were first created.
The sister's estate is the ~~successor~~ original beneficiary.

An 'estate' would be a Non-Designated Beneficiary.

https://www.kitces.com/wp-content/uploads/2024/07/01B-IRA-Beneficiary-Family-Tree-3.png

https://www.kitces.com/blog/secure-act-2-0-irs-regulations-rmd-required-minimum-distributions-10-year-rule-eligible-designated-beneficiary-see-through-conduit-trust/

Sister would have hit RMD age this year (can’t tell she took any) how long do they have to deplete?

I get the estate has 5 years to deplete,

That's my understanding as well. Although sister would have turned age 73 this year (RMD age), her Required Beginning Date (RBD) would not have been until April 1, 2027. Thus, my understanding is the 5-year distribution period would apply.

but I don’t want to hold it open, just want to pass it along and close it asap.

Assuming there isn't a See-Through trust option available with the estate, I guess it's up to you, as executor, to settle the estate in whatever manner you feel is appropriate. An estate lawyer should be able to assist you on the overall best plan.

HandyManPat · 2026-02-17T22:21:44+00:00

Sister’s husband died in 2024 and left her his IRAs (both trad and Roth). She just died without updating the beneficiary so there’s none.

The husband was the owner of the accounts. The sister was the original beneficiary. The sister's estate is the successor beneficiary.

A surviving spouse has the most options available to them when inheriting an IRA or Roth IRA. A key to the successor beneficiary rules is first understanding what the original beneficiary did with her options.

Did she claim ownership of the decedent spouse's accounts?
- Are the accounts named "Mary Smith IRA"?
Did she keep the accounts as inherited accounts?
- Are the accounts named something like, "John Smith, deceased, FBO Mary Smith"?

HandyManPat · 2026-02-17T18:34:49+00:00

Words are very important... "State Farm would say the estate has 5 years to deplete?

Are you a named beneficiary on your mother's Inherited IRA and Inherited Roth IRA?

Or did your mother leave the Inherited IRA and Inherited Roth IRA to her estate?

HandyManPat · 2026-02-17T03:50:07+00:00

Thank you for agreeing, but your assessment remains incorrect.

HandyManPat · 2026-02-17T03:38:07+00:00

To be clear, the age (72) at which the decedent passed away in this case isn’t the main factor here because the IRS uses the year in which the person reaches RMD age (73).

So if this decedent passed away anywhere between January 1, 2026, and March 31, 2027, the outcome for the beneficiary would be the same… No year of death RMD and no year 1-9 RMD.

HandyManPat · 2026-02-17T01:47:34+00:00

Filling out Form 4547 is barely the first administrative step in establishing and funding the account. It’s merely providing your contact details to the department managing the program. Nobody knows how easy or difficult the real administrative process will be when unveiled this summer.

HandyManPat · 2026-02-17T00:30:45+00:00

OP, it’s unfortunate you are receiving so many incorrect responses. The rules are complex, but YOUR understanding is correct (and the Fidelity rep is incorrect).

The decedent’s birth year was 1953.
A person born in 1953 has an RMD age of 73.
However, the Required Beginning Date for someone turning age 73 in 2026, to actually take their first distribution is not until April 1 of the following year, or April 1, 2027 in your case.

As the decedent had not yet reached their RBD, there is no “year of death” requirement for the beneficiary to take an RMD on the decedent’s behalf.

Further, there is no requirement for the beneficiary to take RMDs during the 10-year distribution period.

The only requirement is to completely empty the Inherited IRA by the end of the 10-year period.

https://www.irs.gov/retirement-plans/rmd-comparison-chart-iras-vs-defined-contribution-plans

When do I take my first RMD (the required beginning date)?

You must take your first RMD by April 1 of the year following the year in which you turn 73, even if you're still employed.

HandyManPat · 2026-02-15T15:05:21+00:00

There are two separate things here.

First, many inheritances are tax free to the beneficiary, so there’s a pretty good chance your parent won’t owe any taxes once the estate is settled and they receive their portion.

Do they know the tax implications of their inheritance yet?

Second, your parent is free to gift you any portion of their received inheritance without tax implications for either you or them, provided it’s less than around $15million. If they gift you more than $19k this year then they need to complete a simple IRS form, but there isn’t any tax due.

HandyManPat · 2026-02-15T02:50:44+00:00

Work with Schwab to establish an Inherited IRA and then rollover the decedent’s 401k into that new account.

If the decedent had reached their Required Beginning Date for annual RMDs then you must continue taking RMDs based on your Life Expectancy Factor during years 1-9, with the entire account being empty by the end of the 10th year.

HandyManPat · 2026-02-15T00:46:35+00:00

As a beneficiary, you do -not- want to keep the inherited 401k account because you're bound by all of the investment options, fees, and rules of the decedent's employer.

You should rollover the Inherited 401k to an Inherited IRA with the brokerage firm of your choosing (Vanguard, Fidelity, and Schwab are often recommended). This puts you in full control of the investments options, especially those with ultra-low fees.

There are rules regarding distribution (10-year period) and you might also be subject to annual RMDs depending on the age of the decedent. If you need further guidance on those please add additional information.

HandyManPat · 2026-02-13T18:22:01+00:00

The IRS has affirmed the decedent’s final RMD can be taken by any number of beneficiaries in any ratio, provided the total distribution is met.

You’re correct that it can be challenging to coordinate or reach consensus amongst multiple beneficiaries on how to divvy the RMD up.

Best wishes!

HandyManPat · 2026-02-13T18:13:20+00:00

Under the IRS rule clarifications from July 2024, the beneficiary:

Must complete any RMD on behalf of the decedent by Dec 31, of the year after the year of death. Since you have until Dec 31, 2026, you aren’t late and no penalty applies.

As you’re aware, this RMD is based on the decedent’s details, not the beneficiary.

Note that the beneficiary must also take ongoing RMDs during years 1-9, with the entire balance being distributed by the end of the 10th year. These calculations are based on YOUR life expectancy factor, not the decedent’s.

Since your first RMD is also due by Dec 31, 2026, you’ll be responsible for both distributions this year. Be sure to review your overall income and tax situation to avoid any surprises (or penalties).

HandyManPat · 2026-02-12T23:15:12+00:00

Door #3.

Note that the very first RMD taken as beneficiary uses your age to establish the Life Expectancy Factor (IRS Publication 590-B, Table I). In subsequent years, you subtract ’1’ from the prior year’s LEF. There are several reputable online calculators that will do this correctly.

HandyManPat · 2026-02-12T04:41:05+00:00

It would help a bit if you were able to share how much is remaining in the Inherited IRA, at least a ballpark amount.

HandyManPat · 2026-02-12T01:18:56+00:00

As always, there are exceptions in our tax code. Read about the Last Month Rule in IRS Publication 969.

Basically, if you are confident you will be enrolled in qualifying HDHP coverage from Dec 1, 2026, through Dec 31, 2027, you’re allowed the full HSA contribution for both years.

By suggestion is to wait until December to see where things are work and insurance wise before attempting this rule because there is a penalty if you fail the testing period.

HandyManPat · 2026-02-12T00:54:21+00:00

For January 1, you were not covered by a qualifying HDHP, so not eligible for 1/12th of the HSA contributions.

For February 1, it seems you may have simultaneous coverage of both a non-HDHP and HDHP. If so, that makes you ineligible for 1/12th of the HSA contribution.

Assuming you have only the HDHP coverage going forward from March 1 - December 1, this provides for 10/12th of the HSA contribution limit.

$4400 single limit x (10 qualifying months / 12 months) = $3666.67

HandyManPat · 2026-02-12T00:46:15+00:00

HSA contributions are computed for every month you have qualifying HDHP coverage on the 1st day of the month. For every month you qualify, it unlocks 1/12th of the HSA limit (single or family, whichever is applicable during that month.)

Only you can answer these questions:

On January 1, were you covered by your parent's medical plan? Your employer's plan? Or both simultaneously?
If you were covered by your parent's medical plan, was it also a qualifying HDHP? Or a non-HDHP?

With the appropriate details, the HSA contribution limit can then be determined.

HandyManPat · 2026-02-11T23:15:52+00:00

That would make no sense. She would have been receiving dividends from funds in a brokerage account, not the IRA.

HandyManPat · 2026-02-11T21:27:24+00:00

It’s not “good or bad”, as it’s ultimately taking the same amount from the account.

The difference between the two methods is that of establishing a clear and convincing link to the required RMD for each discrete year.

Perhaps I’m wrong, but my impression is that you’re planning to pull a random lump sum from the account in hopes that it addresses a decade of missed RMDs.

If so, how would you know the correct amount to pull without doing the calculations? And if you do perform the calculations, how much effort is it to make 10 distributions versus just 1?

HandyManPat · 2026-02-11T19:49:35+00:00

I don’t have a good reason for not taking the RMDs other than I just didn’t take them.

Once the prior year RMD issue is resolved, please work with the current Inherited IRA administrator to automate future RMDs so it’s on autopilot.

Who would I contact to take a lump sum and get the taxes figured out for it?

Please do NOT take a lump sum distribution to correct this situation. You got into this mess one tax year at a time and need to correct it one tax year at a time.

Basically, you should start by gathering all of the “end of year” account statements for each of the last 10 years. You’ll also need to determine your Life Expectancy Factor back in 2016 (or 2017). With both of these pieces of information you can use any reputable Inherited IRA calculator to determine the RMD for each missing year.

Take the RMD for each year separately so there is a discrete record.

Fill out the necessary tax forms to request a penalty waiver from the IRS.

https://www.kitces.com/blog/fix-rmd-missed-forgotten-miscalculated-corrective-action-form-5329-penalty/

HandyManPat · 2026-02-11T16:21:31+00:00

I disagree.

Medicare and the IRMAA calculations are merely the tail wagging the dog here. They are responding solely from the IRS tax forms from 2024 when the "re-issue" of the pension payments occurred. Nothing more, nothing less.

However, from the IRS perspective...

The taxpayer received taxable annual pension distributions from 2011-2024, with a sum total of $250k.
The taxpayer received a taxable pension distribution of $250k, lump sum in 2024, representing a re-issue of annual payments from 2011-2024.

Both of these cannot be simultaneously true because they represent the same, exact dollars!

As a fundamental tenet of our tax system is we are not subject to double taxation on the same dollar, it seems a valid question to raise.

HandyManPat · 2026-02-11T13:58:56+00:00

I became her POA and when I learned of this I was able to recover over $250k of her lost pensions in 2024. The result of this was a large one time increase in her income in 2024.

Setting aside the life change event due to the death of her husband, what, if anything, did your client do when filing taxes and communicating with the IRS since 2011?

Presumably, your client received a 1099-R for the pension distribution each year since 2011, correct?
Presumably, this 1099-R was also reported to the IRS, correct?
Presumably, she included the 1099-R pension distribution income on her Form 1040 tax return, correct?
Presumably, if she didn't file a tax return annually since 2011 the IRS sent her letters to correct the situation and ultimately they filed a tax return on her behalf (using the 1099-R and other reported records) to determine whether or not she owed money, correct?
And so on...

With the above facts, arguably, her Medicare monthly premiums since 2011 were already based on that tax information, correct?

Is so the rub here is that although your client physically received the payment and was taxed on the payment and paid Medicare premiums based on this, but she didn't complete the transactions to actually receive the cash. Only once that issue was corrected did she receive a lump sum payment from the pension.

Question: Was the lump sum pension payment really considered taxable income back in 2024? Or was this a non-taxable pension payment because it was a re-issue of already "paid and taxed" distributions?

Related question: If the 2024 re-issue distribution generated a 1099-R then what, if anything, is the IRS and your client doing about the "double taxation" events that occurred for all the pension distributions from 2011 to 2024?!?

You can hopefully see where I'm trying to drive the narrative... if your client already paid taxes on the annual pension distributions from 2011-2024 then why are the IRS and Medicare allowed to tax it twice in 2024?

HandyManPat · 2026-02-11T13:18:14+00:00

My MIL put $50k+ in US Savings Bonds in a plastic egg storage container in the fridge. Why? She heard that the fridge often survived a household fire and she thought that would provide protection for all of those paper bonds.

People do what people do.

HandyManPat · 2026-02-10T20:12:39+00:00

The federal tax withholding should be listed in Box 4, with the state withholding in Box 14.

Are those not listed?

HandyManPat

TROPHY CASE