Inherited IRA of Non-Resident Alien
In the case of an Inherited IRA for Non-Resident Aliens taking distributions, should the distributions be reported on Form 1099R or Form 1042S? Two differnt IRA(s) at issue here…one distributed from Fidelity as a Form 1099R distribution for RMD plus additional funds at discretion. The other is from Merrill Lynch which is issued as a Form 1042S for RMD and any additional discretionary funds. I feel that the distribution format (Form 1042S) from Merrill is incorrect and format (Form 1099R) from Fidelity is correct. Any guidance on this wold be helpful for these claints and I am willing to go back to the incorrect party and challange them on this for the corrections.
Thank You 😀
Permalink Submitted by mk foss on Tue, 2012-04-24 03:59
I can understand the confusion. Form 1099R is used for IRA distributions and Form 1042-S is used for withholding from non-resident aliens. Presumably both forms show the taxable amount and the federal tax withheld. Annuities, pension distributions and other deferred income are specific items to be included on From 1042-S. I don’t see that either form is wrong.
Permalink Submitted by John Walters on Tue, 2012-04-24 05:00
As a follow-up to my earlier question, Non-Resident Aliens inherited sufficient assets to require Estate Taxes to be paid. With the ability to report the IRA distributions on page 1 of Form 1040NR they will be able to take itemized deductions (IRD) on page 2 of Form 1040NR to reduce the taxable income distribution. If the IRA distributions are reported only on page 4 of Form 1040NR then client does not get to reduce taxable income since (it is reported as income not effectively connected to US trade or business) It seems that the clients are getting taxed twice on the IRA distributions and not having the ability to take advantage of their ability to use (IRD) rules to offset and reduce taxable income hence reduce taxes on the distributions. Since and IRA is “deferred” income, even if distributions are reported on a Form 1042-S should they be reported on page 1 of Form 1040NR instead of page 4 Form 1040NR?