Do I report a 1099-R for an inheirited non-spousal IRA?

[rfj51934]

The 1099-R that I received indicates a taxable amount for the gross distribution.  This amount was rolled into a new IRA.  If this taxable amount is included I am charged with a tax bill. How do I enter this 1099-R without showing the taxable amount that is reported?.  

[macuser_22 · Accepted solution]

What code is in box 7 on the 1099-R?   If a code 4, then it cannot be rolled over and is a taxable distribution.  An inherited IRA will never have a code G.

A "non-spousal" inherited IRA is not eligible to be rolled over at all.  It can only be transferred with a trustee-to-trustee transfer to another inherited account and must remain in the name of the deceased.   If the money was distributed to you and put into another IRA then any amount that exceeds your allowable yearly contribution limit, is an excess contribution, subject to a penalty each year until it is removed.

See IRS Pub 590B
https://www.irs.gov/publications/p590b/ch01.html#en_US_2016_publink1000230538

Quote from Pub 590B
"Inherited from someone other than spouse.   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. This means that you cannot make any contributions to the IRA. It also means you cannot roll over any amounts into or out of the inherited IRA. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. "

[Patrice]

Yes, you would report the 1099-R. Whether or not it becomes taxable income on your return is based on the code that is reported in box 7.  If the code is box 7 of the 1099-R is a "G" then it will be considered a rollover and will not be be taxed.  

However, The rollover is included in your total income, but it is not considered taxable income.  The IRS requires that all distributions must be reported on your tax return.   However, that does not mean that it is being taxed or that it affects your tax in any way. The screen shows all income both taxable and non-taxable. The distribution will show on your tax return with the word ROLLOVER next to it.  You have to check the actual 1040 return.  Line 16b is the taxable amount and it should say ROLLOVER by 16b (1040A line 12b). TurboTax will include the entire distribution on Form 1040 line 16a or Form 1040A line 12a but exclude the amount rolled over from the amount shown on line 16b or 12b. 

[rcs241]

Why am I receiving a 1099R for the total principle amount of an inherited spousal IRA .   I also received a 1099R

for the RMD I took on this account last year.

[DawnC]

Enter both of your 1099-Rs in TurboTax.   Nonspousal inherited IRAs can't be rolled over, but spousal accounts can be rolled over to the spouse's IRA.  There will be follow-up questions that will determine the taxability of the income you received.   If you rolled the principal amount over to your own IRA, the rolled over amount will not be taxable to you.   But you need to enter both 1099-Rs in TurboTax.   Where to enter your 1099-Rs

Spousal beneficiary options - IRS Retirement Topics

If the account holder's death occurred prior to the required beginning date, the spouse beneficiary may:

• Keep as an inherited account
  • Delay beginning distributions until the employee would have turned 72
  • Take distributions based on their own life expectancy
  • Follow the 10-year rule
• Roll over the account into their own IRA

If the account holder's death occurred after the required beginning date, the spouse beneficiary may:

• Keep as an inherited account
  • Take distributions based on their own life expectancy, or
• Rollover the account into their own IRA