1099-R non spouse inherited IRA coded 1
55 YR OLD T/P received inherited IRA from her dad.
1099-R says code 1. it should be code 4. Is this because it is titled as follows:
the taxpayer name
under that says Deceased IRA and her dads name. Original preparer of return had them pay the 10% penalty and then did not exclude 20,000 on the NY return as the dad was 90.
Do I need to get 1099-R amended to show code 4?
Permalink Submitted by David Mertz on Thu, 2022-03-03 17:30
Yes, the Form 1099-R needs to be corrected to show code 4. This is clearly an error made by the IRA custodian.
Permalink Submitted by Alan - IRA critic on Thu, 2022-03-03 17:42
IRA custodian made a clerical error as the account title reflects an inherited IRA with DIst Code 4. The 1099R does not need to be amended, as TP can file Form 5329 showing exception code 04 (Death Dist) on line 2 of the Form with a 1040X. Pub 36 (NYS) generally allows the 20k subtraction for beneficiaries of any age subject to certain conditions outlined in the Pub.
Permalink Submitted by David Mertz on Thu, 2022-03-03 19:28
Code 04 would eliminated the penalty, but the code 1 is still inconsistent with the custodian knowing that the distribution is from an inherited IRA. The instructions for Form 1099-R indicate to use code 1 only if certain other codes, including code 4, do not apply. I would worry that there might be some circumstance where the IRS would infer from the code 1 that the account might not be a valid inherited IRA. Also, some makers of tax software might require that you use a higher-priced version to have support for Form 5329 for this purpose.