When you inherit a retirement plan from a deceased spouse or relative, depending on the type of plan and how the deceased made contributions, you may have to pay income tax on the plan's distributions.
A Form 1099-R will usually report a "Q" or a "T" in box 7 for an inherited Roth IRA account.
"Q" means that the holding period of five years for qualified distributions has been met, so the amount is not taxable as it is a qualified distribution.
"T" informs the IRS that the holding period was not met, but the distribution is exempt from the penalty for early withdrawal because it has been paid to a beneficiary. The initial withdrawn contributions are tax-free; however, distributed earnings are taxable.
In other words, whether you enter a 0 or you don't enter anything in Box 2A, it will tax you on the earnings which is the amount shown on Box 1 because it is considered an unqualified distribution based on the code T. You will not incur the penalty for early withdrawal because it was a inherited beneficiary.
You would need to know if the distributed earnings are indeed what is showing up on that Box 1 or it is some other amount because the program will tax that amount. No early withdrawal penalty will be added.
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