inherited IRA screw ups

Submitted by Richard Nelson on Tue, 2022-08-23 02:25

Error 1
Dad died Oct 23rd, 2018. He had $10950 left in his traditional IRA. I noticed after the fact from his bank records that a distribution for $6900 was taken on Nov1 2018. This was something he and the bank had set up to auto draw down his IRA annually on Nov1. The distribution went into his/my joint checking of which I was a joint owner. This checking account was basically mine now. A 1099 was created for dad and it was included in income for his final 2018 1040. This I’m thinking was an error; I didn’t get to the bank soon enough to freeze his accounts. Us three kids were named beneficiaries on the IRA account. Any distributions after his death should have gone to us. He didn’t make enough to pay any taxes that year even with the distribution included… I eventually evenly distributed this joint checking account among us siblings

Error 2
FastForward March 2019, as executor I’m at the bank to close out the IRA. Ira custodian first does a $450 RMD distribution to the estate account .1099 was created and the $450 flowed to the estate 1041for 2019. If an RMD was even needed it should have gone to us 3 kids named beneficiaries on the Ira am thinking.

Error3
April 2019 $3600 left in the dads IRA now. Custodian mails a check to each of us for $1200. Does not create a 1099 apparently. The 3 of us never receive one. Left a note to cpa to include $1200 income on my 2019 1040, he did not because no 1099.

What on earth do I do now? Do i file an amended return? 2018 and 2019 personal 1040.

.



Submitted by Alan - IRA critic on Tue, 2022-08-23 02:56

  1. Error 1 – forget about it. 2018 is now a closed tax year. His year of death RMD was distributed, check should have been returned and made payable to beneficiaries or even just one beneficiary if the 3 of you agreed. In any event, the 2018 tax year is now closed, so nothing further needs to be done about this error.
  2. You are correct. Custodian messed up. Why would they issue a check to the estate when 3 individuals were named beneficiaries?  What about the rest of the total distribution? Is the estate now closed, and if so how was the 1099R reported? It should have been reported and then subtracted on the 1041 and using the nominee process referred 1/3 to each beneficiaries’s return and reported there with the rest of the total distribution. 
  3. Would have suggested to ignore error 2, but since error 3 was added to it, each beneficiary should amend their 2019 return to report 1350 of additional IRA income. CPA also messed up since realized income should be reported whether a 1099 is issued or not. The other beneficiaries should do the same, but it’s their decision. 


Submitted by Richard Nelson on Tue, 2022-08-23 04:08

was just approx, 10950 , the 3 distributions used it all up . Estate has been closed for about a year. 1099R was reported on line 8 other income on the 1041. Not properly subtracted and referred 1/3 to each beneficiary as you describe with k1. CPA and custodian now retired think they were on quiet quit. Yes I’m inclined to do as you say. FIle amended 2019 and report additional 1350 income. Brother in law will blow it off ..lolThanks a lot for your input.



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