When handling the Required Minimum Distribution (RMD) from a deceased parent's SEP IRA and filing the final income tax return, here's how this situation typically works:
- Missed RMD in the Year of Death: If your father passed away in 2024 and did not take his RMD for that year, the IRS requires the RMD to be distributed to the beneficiaries by the end of 2024. This RMD is taxable to the beneficiaries, not to your father, and is reported on the beneficiaries' individual tax returns, not on his final return.
- Who Withdraws the RMD? If the SEP IRA was divided into separate inherited IRAs for each child, then each beneficiary is responsible for taking their proportional share of the RMD and reporting it on their own tax return.
- Who Withdraws the RMD?If the SEP IRA was divided into separate inherited IRAs for each child, then each beneficiary is responsible for taking their proportional share of the RMD and reporting it on their own tax return. If the IRA is still a single account (not yet split among the siblings), one sibling can withdraw the total RMD on behalf of all beneficiaries. In this case, that sibling would receive the Form 1099-R for the entire withdrawal and must report it on their tax return. The siblings can work out reimbursements privately, but tax-wise, only the withdrawing sibling is liable for the reported income.
Do Not Report the RMD on Your Father's Return: Since the RMD is taxable to the beneficiaries, it doesn’t appear on your father’s Form 1040 for 2024. You only report his actual income (up to the date of death) on his final return.
Each beneficiary should receive a Form 1099-R from the financial institution for the portion of the RMD they withdrew (or for the full RMD if one sibling withdrew it all).
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