Inherited IRA

Submitted by JEFFREY SCHRADER on Thu, 2013-03-07 22:12

Can we please revisit my earlier post? See fact pattern below. I am getting many conflicting responses regarding the proper reporting from the transferor custodian’s perspective. The most important question is:

What should be reported to my taxpayer on the 2012 Form 1099-R issued by the father’s IRA custodian, if indeed ANY 1099-R should be issued? And what should the coding be? Remember, inherited IRAs do not qualify for standard rollover treatment.

FACT PATTERN:
Taxpayer, age 55, inherits her father’s IRA at father’s death in October 2012. Her father was 80 years old and had taken all necessary RMDs.
Taxpayer properly creates an inherited IRA account at her custodial institution. A direct transfer then occurs in late 2012 from the father’s IRA custodian to the taxpayer’s custodian.
Taxpayer receives a 2012 Form 1099-R from father’s IRA custodian. Boxes 1 and 2 show identical amounts. Box 7 shows Code 4. Taxpayer took no distributions from account in 2012.
Is Code 4 the correct coding in this instance? There was no taxable transaction, just a custodial transfer. Should a Form 1099-R have been issued at all?



Submitted by Alan - IRA critic on Thu, 2013-03-07 23:23

Taxpayer should not have received a 1099R provided she did a transfer and did not receive a distribution. If this was a transfer she needs to get the 1099R rescinded ASAP. (You meant Box 7, not 6).



Submitted by JEFFREY SCHRADER on Fri, 2013-03-08 15:48

Can you please refer to my response posted online?  Your help is appreciated.



Submitted by JEFFREY SCHRADER on Fri, 2013-03-08 14:49

Thanks for your response.  I did mean Box 7.  Do you have any citation for the treatment (in this instance, the nonissuance of a Form 1099-R) in this particular case?  Again, thanks.



Submitted by Jose Morales on Fri, 2013-03-08 16:33

You can cite page 22 of the 2012 Publication 590:  http://www.irs.gov/pub/irs-pdf/p590.pdfThis should be pretty straighforward if the client had the new custodian of the inherited IRA send a transfer request to the custodian that held the IRA of the deceased.  They should have a copy of the transfer request, and the client should be able to get a copy from their own custodian as well if they want to save some time when speaking to the previous custodian.  If the client went to the first custodian themselves and requested the funds be provided to him directly to then bring over to the new custodian, things could get messy.



Submitted by JEFFREY SCHRADER on Tue, 2013-03-12 20:17

Please see my restated question below.



Submitted by Alan - IRA critic on Tue, 2013-03-12 20:42

Do not see restated question……..



Submitted by JEFFREY SCHRADER on Tue, 2013-03-12 21:09

Please go to top of thread.  Thank you.



Submitted by Alan - IRA critic on Tue, 2013-03-12 23:08

IF a TtoT transfer was done, there should be NO 1099R issued. See page 18 and 22 of Pub 590 here: http://www.irs.gov/pub/irs-pdf/p590.pdf. If there was a 1099R issued in error, the issuer must rescind it or the IRS will expect the taxable income to be reported. If the 1099R was NOT in error, then there is no solution to paying the tax bill that results. I would elevate this discussion to the supervisory level at the IRA custodian if you feel the 1099R should not have been issued. If they still refuse to rescind it, I would suggest bringing that to the attention of the IRS. Still not sure if this is what your question is, could not find anything else in this thread.



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