IRA Distribution Estate, Deceased tax return or Beneficiary tax return

Submitted by scott seamon on Tue, 2022-03-22 02:09

Sole surviving parent passed in early 2021, no beneficiary setup when the account was moved to another institution due to covid restrictions. $100,000 distribution taken for 2021. The 1099-R is issued with the estate tax ID. The Executor of the estate is the only remaining son and is listed as the sole beneficiary according to the will. Can the 1099-R be re-issued with the deceased tax payer ID and be filed as an ordinary tax return. This would be the most beneficial method of tax reporting. If not possible, could the 1099-R be re-issued with the son’s tax payer ID and processed under the son’s 2021 tax return as the beneficiary.

Thank you for you assistance with this matter.



Submitted by scott seamon on Tue, 2022-03-22 02:23

Deceased parent was 80 years old and therefore began minimum IRA distributions  

Submitted by Alan - IRA critic on Tue, 2022-03-22 02:49

No, the 1099R must remain as issued, reporting the distribution to the entity that received it, the estate. This will force the estate to file a 1041 reporting the income, although it can be passed through the estate on Form K 1 issued to the beneficiary under the beneficiary SSN. The beneficiary will then report the income on his personal income tax return and pay at his personal income rate, much lower than the compressed tax rates of an estate in most cases. 
Since the parent passed after RBD, the estate beneficiary RMDs are calculated at the remaining single life expectancy of the deceased parent. However, if the executor wishes to terminate the estate, the remainder of the inherited IRA can be assigned out of the estate to the beneficiary, who can then manage his own inherited IRA. However, this will not change the RMD schedule required of the beneficiary.

Submitted by scott seamon on Thu, 2022-03-24 11:55

Alan, thank you for your assistance. I was under the impression that an inherited IRA as stipulated above in the attached summary that one could take the 10 year rule as noted under the new proposed regulations or have the option to take the remaining single life expectancy of the deceased parent. The estate IRA has subsequently been moved out of the estate to an inherited IRA.

Submitted by Alan - IRA critic on Thu, 2022-03-24 14:50

Assignment out of the estate does not change the fact that the estate inherited the IRA, and not the estate beneficiary, who needed to be named directly as beneficiary in order for the beneficiary to be treated as an individual. Assignment does not change the beneficiary’s RMD from that of a non individual beneficiary.

Submitted by scott seamon on Thu, 2022-04-14 15:35

Where would an Ira distribution from an estate passed through to the beneficiary be recorded on the K1 form. Additionally, where would the tax withheld be recorded on the K1. thank you

Submitted by Alan - IRA critic on Thu, 2022-04-14 16:55

Box 5.
Except in cases where it’s necessary for an estate or trust retain income and resulting in the estate paying income taxes, NEVER have the custodian withhold taxes on an IRA distribution paid to an estate or trust!  Decline such withholding when an estate or trust is a beneficiary.  The credit for tax withholding cannot be passed through on a Schedule K-1.  If you have the custodian withhold taxes you’ll have to keep the estate open an extra year to be able to receive the refund, distribute the refund to the estate beneficiaries and file another Form 1041 with Schedules K-1.

Submitted by Tom Muller on Sat, 2022-08-20 12:49

Hi, the family of a deceased is receiving a distribution from estate for pre-tax 401k funds of deceased sibling.  (No beneficiary was named on 401K beneficiary form so the distribution went to the estate from 401k).  The intent is use Form K-1 to execute a pass through so that they can report the income on their personal income tax returns as recommended above.  Deceased passed in March 2022.  The executor is using the Fiscal Year approach for the Estate tax filing and intends to file 1041 in January 2023 based on the date of death.  What would be the applicable tax year for beneficiaries to report the income from the estate on their personal tax returns?  Is  it based on date of death or is it when they actually receive the funds from the estate?  Or can it be the date of the filing of the Estate tax Form 1041 in Jan  (hence the beneficiaries can include the income in the tax year 2023 personal tax forms).   Trying to determine any flexibility the beneficiaries might have for reporting the estate distribution income in tax year 2022 or 2023 on their personal yearly tax returns.      

Submitted by David Mertz on Sun, 2022-08-21 14:29

  • A Schedule K-1 is reported on the individual’s tax return that covers the end-date of the fiscal year to which the Form 1041 applies.  If the Form 1041 is being filed in January 2023, that implies that the end of the fiscal year to which the Form 1041 applies is in 2022 and the Schedule K-1 would be reported on the beneficiary’s 2022 individual tax return.
  • With the decedent having died March 2022, the estate could use a fiscal year end-date in early 2023 to push the income to the beneficiary’s 2023 tax return, but that’s up to the estate.  If there are multiple beneficiaries receiving pass-through income, what’s best for one beneficiary might not be best for another.

Submitted by Kevin Strel on Sun, 2022-08-21 19:56

I have an almost identical situation to DMX, however the distribution will happen this year.   2020 and 2021 1041’s have already been filed based on a calendar year.    Am I correct in assuming it is allowed (and practical) to file a 1128 and start a 2022 fiscal year ending 2/28/22?    This is not an unallowed retroactive change.    (Deceased in March 2020).  

Submitted by David Mertz on Sun, 2022-08-21 22:24

I’m not familiar with changing an accounting period, but looking at the instructions for Form 1128 it seems that this change would require approval of the IRS and might require adjustments that would neutralize the effect of shifting of income from one year to another.

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