Minor child IRA Inheritance -1099R over $20k Total Distribution

[dnash@dnatsi.com]

Would appreciate direction on when Kiddie Tax rules apply - 2018 tax client's minor child received 1099-R, IRA total distrubution, Code 4 - grandparent death, over $20k. Am I required to file a seperate return with the IRA distrbtution in name of said child? No parent named as custodian, and they did take the entire distribution. I have been researching and want to better understand, never had this before. Great learning experience! Was not sure if filing seperate return or if this goes on parents return.... appreciate advice....

[Rapid Robert]

Yes, need to file a separate return. based on rules for filing requirement (has nothing to do with kiddie tax). Separately, the Kiddie tax rate applies to unearned income, and only interest/dividend income of the child can be optionally reported on parent's return. Kiddie tax rates are now the same as trust rates, does not depend on parent's income. It's probably too late now, but perhaps the distribution could have been spread out over five years to reduce the one-time tax hit (assuming lifetime distributions were not desired, and grandparent was not already taking RMDs).

[dnash@dnatsi.com]

Rapid Robert many thanks. I wished they would have talked to me about the distribution, but unfortunatley did not until they brought the tax docs in.... appreciate the confirmation on direction!! Thank you!

[Burke]

I wished they would have talked to me about the distribution, but unfortunatley did not until they brought the tax docs in.... appreciate the confirmation on direction!! Thank you!

Happens ALL the time. Too late to mitigate any tax consequences. Especially with estates. You have to get to them early. I hesitate to bring it up with bereaved family, because it seems like ambulance chasing, but they definitely need our advice when this happens, and not just with IRA's. .