This might be more of a question for a true CPA forum, but here goes anyway:

Suppose Grandma dies, leaving $200k IRA to minor Grandson. Custodial parent/guardian is spendthrift Mom (Grandma’s daughter) and she becomes custodian of the bene IRA account (yes, I know this is a really bad idea, but please roll with me).

Mom, acting as custodian, takes a lump-sum distribution of the full $200k. The 1099 is reported to Grandson. Mom cannot include this income on her own tax return as it’s over $10,500.

Mom blows all the money within a year, and out of ignorance or neglect (or both), fails to file a tax return or otherwise pay taxes on behalf of Grandson for the $200k of ordinary income.

Who does the IRS go after in a case like this? Mom, most likely, will eventually be held accountable for failing her duties as guardian/custodian. But who does the IRS start with? Do they actively open up a case in the name of the delinquent taxpayer (Grandson)?

Wondering if there is a way in which the IRS could avoid pulling the minor child, his name and his SSN through the mud in addressing this delinquency. Could they open a case directly on Mom, perhaps after a new guardian has been named, and leave Grandson out of it entirely?