How to fix incorrect 1099-R for an Inherited IRA shown as taxable income on Box 2a
Bank transferred IRA to Inherited IRA upon the death of the taxpayer. They correctly show the distribution in box 7 as 4 Death. However, they show the transfer from the IRA to the Inherited IRA on Box 2a as being totally taxable. Does bank need to amend?
Permalink Submitted by Alan - IRA critic on Wed, 2025-01-22 22:59
If the beneficiary is a non spouse, the transfer to an inherited IRA is not reportable, is not a distribution, and the 1099R should be rescinded because it should not have been issued.
However, if a distribution actually occurred to a non spouse beneficiary, a rollover is not allowable and a 1099R would have to be issued.
Therefore, it needs to be determined how the funds were moved into the inherited IRA.
If the beneficiary is the surviving spouse, please advise.
Permalink Submitted by Leta Selman on Wed, 2025-01-22 23:05
The internal transfer was made from the IRA account to an Inherited IRA account in the name of the Beneficiary which was a trust. Is your answer still the same that the 1099 R should be rescinded.
Permalink Submitted by Alan - IRA critic on Thu, 2025-01-23 10:27
Yes, it should never have been issued. This type of 1099R error is rare and could have been caused by a coding error made by a bank employee.
If the 1099R is not corrected, the IRS will consider this a taxable distribution and an excess contribution to the inherited IRA.