RMD the year after the year of death
My wife is an enrolled agent with the IRS. One of her clients really screwed up. His father died in 2018 with an IRA. They took the RMD for 2018, but neglected to tell the firm holding the IRA that the father had died, as my wife instructed the son/executor. In 2019 the firm sent out the 2019 RMD in the name of the deceased father. We don’t know what the son did with the money; we presume the money went into a joint account between the son and deceased father, and that the son later distributed the cash to himself and his three siblings who are the listed beneficiaries on the account. Now the son is holding a 1099-R for the distribution and asking what to do with it. What’s the correct way to fix this screw-up? Thanks for any help you can provide.
Permalink Submitted by Alan - IRA critic on Thu, 2020-04-09 18:24
It is fairly common that automatic RMDs are issued to a decedent before the estate or beneficiaries get around to notifying the IRA custodian. The IRA custodian is not about to issue a corrected 1099R and the decedent’s final 2018 return has likely been long since been filed. At this point each beneficiary should report the income they received (or should receive from the executor) from that distribution on their 2019 returns with an explanatory statement why they are reporting it. If they already filed 2019, they should amend it. As for the 1099R, the IRS knows from SS records and decedent’s final 2018 return that decedent has passed, but does not know where the income should be reported. Executor should prepare an explanation indicating the name and SSN as well as the amount that each beneficiary received and should hold it until the IRS sends an inquiry of some type regarding the unreported 1099R. The usual nominee process is not well designed for this situation, but there might be a better option than the procedure posted above.