Year-of-Death Reporting for Deceased IRA Owners

By Joe Cicchinelli, IRA Technical Expert
Follow Me on Twitter: @JoeCiccEdSlott

If you are handling the affairs of an IRA owner who died last year, you need to be on the lookout for certain IRS reports that show IRA activity last year.

If the decedent took an IRA distribution last year while he or she was alive, that distribution needs to be reported on IRS Form 1099-R. The distribution must be reported in the decedent’s name and Social Security number with all the pertinent information that is required on Form 1099-R as if he or she was still alive. You then need to correctly report that information on the decedent’s federal income tax return for 2014.

Even if the deceased IRA owner didn’t take a distribution last year, there is special reporting of his or her IRA balance. For the year of death, the IRA custodian must file IRS Form 5498 for the decedent, showing the IRA’s fair market value (FMV), including any contributions the decedent made before he or she died. (Note that if the decedent made any contributions or rollovers last year, those contributions must be properly reported on his/her tax return.)

The IRA custodian can show the FMV as of the date of death, or the FMV at year end (which will be zero because the actual year-end FMV is reported on the beneficiary’s Form 5498). These rules are the same for Roth IRAs as well. If the FMV shown is zero, you as the executor or administrator of the estate can request a date-of-death FMV from the custodian. You might need the date of death value for federal estate or state estate tax purposes.