1099R Code 4 taxable?

[Davc]

Dave...I say it is the trustee's responsiblity to get the information.

Erchess...many still are non taxable but with IRA's it depends on how the transfer/distribution is handled. taxea

No. It's the responsibility of the IRA's owner to track basis. The trustee can't without being provided 8606 for each year a contribution was made.

[Possi]

Thanks, Gang!

I will deliver the news today. And now I am loaded for bear when they attempt to shoot the messenger. I can put it back on them....

Gracias!

[taxea]

Dave...I say it is the trustee's responsiblity to get the information.

Erchess...many still are non taxable but with IRA's it depends on how the transfer/distribution is handled. taxea

[Burke]

Couple of points of clarification here:

1. A bene must complete a form for distribution of death benefits from an IRA. There is a section to check and/or sign for FIT (and SIT withholding in some cases). So the client failed here. Also, they probably could have had the custodian transfer the funds to an acct in their name (with the same custodian) and take distributions instead of a cash withdrawal. I believe the custodian is now required by law to furnish all this info (and has been for some years.)

2. Form 4972 and the 10yr averaging rules were for qualified pension plans, not IRA"S.

3. There is no penalty at any time for the recipient for death proceeds, and it does not matter how old the deceased was.

[Davc]

since "taxable amount not determined", there is the "POSSI"bility that there could have
been non deductible contributions into said IRA by decedent.

The "taxable amount not determined" box is meaningless for an IRA. It should always be checked. The trustee doesn't have the information to make that determination.

[taxea]

Quote:
Originally Posted by Possi
Who is to blame for that? My client? Were they given the option to withhold and didn't? Or did the institution issuing the 1099, for some reason, think it would not be taxable?

Your client should know the answers and if he/she doesn't then he/she should get them from the company that the money came from. There are right ways to transfer IRA's. Investment companies should know this and act accordingly. Or perhaps the personal rep or trustee handled the distribution from the estate.

IRA death distributions are different than cash inheritances. Check Pub 17 or the IRA publication. taxea

[David1980]

Who is to blame for that? My client? Were they given the option to withhold and didn't? Or did the institution issuing the 1099, for some reason, think it would not be taxable?

I usually blame the taxpayer. You get $60 grand and don't think to ask your tax preparer what the consequences are? Perhaps they wouldn't have known if it was or wasn't, but when you're getting money (and the general rule is income is taxable) you should find out what the skinny is so you can preparer for the bill if any.

[AZ-Tax]

Possi, you have a goat in your office, brillant.....

I need to get one of those. I wonder if it would be a business related expense. A shredder is. Hmmm. Now I dont have to spend so much time shredding. : )

[S T]

Death Benefit

Yes way back when, an exclusion of up to $4,000 or $5,000 on death benefit, then I think there was also something about a lump sum distribution calculation, was it form 4972. Haven't seen those in years.

In fact I lost a client because of the death benefit exclusion one year, as it had expired, and she wouldn't believe me and found another preparer that would take the death benefit exclusion.

Sandy

[Larmil]

when death benefits were non taxable?

You are showing our age , if memory serves the non-taxable was limited to something like $5,000 per deceased.

[Possi]

You'd think...

... that it was actually inherited and not taxable, wouldn't you?

[erchess]

Wasn't there a time

when death benefits were non taxable?

[Possi]

I don't know...

since "taxable amount not determined", there is the "POSSI"bility that there could have
been non deductible contributions into said IRA by decedent.

... and since they he is no longer in this world, I will never know. Good point, and the play on my nick name left me laughing again today!

[Possi]

true that

That is highly "POSSI"ble.

Still gets my goat. Maybe I'll just put on my big girl panties and tell them to bring their fat wallets to pick this one up!

Thanks y'all.

[Jesse]

And that's probably why they "swished in" and probably "swished out" just as fast, here ya go, see ya later, call me when it's done!

Because they have an idea it's coming - they're just afraid of how much.