How do i report an inherited ira from a parent

[jkloop1985]

does the inherited ira count against my own contributions to my personal roth ira

[IreneS · Accepted solution]

No - An inherited IRA does not count as a contribution to your own IRA – it must remain a separate entity.  The IRA actually remains in the parent's name, along with yours, and any distributions will be reported on a 1099-R with a code 4 (death) in box 7.  You can not make any contributions to the inherited IRA.

Please note that since the IRA was inherited, you must start taking distributions by the end of the year following the year of death.  The exception to this is if the entire account balance is distributed by the end of the calendar year five years after the year of death.

You do not need to report the inheritance, but you do need to report any distributions from the IRA reported to you on a 1099-R.

[jkloop1985]

So leaving the money in the IRA till I am of retirement age is not an option (I am in my 30's)...I have to start taking distributions and empty the account w/in 5 yrs?

[IreneS]

Yes, except that it's EITHER start taking distributions OR empty the account within 5 years.  One condition on the 5-year rule--it doesn't apply if IRA owner died on or after the required beginning date for THEIR required minimum distributions [April 1 of the year following the year they reach age 70-1/2.]  
For additional information, see IRS Pub 590-B - Distributions from Individual Retirement Arrangements (IRAs)

[Edited | 3/13/2020 |  1:00pm PDT]

[jpwcoast]

I also inherited an IRA from non-spouse.  I reported the RMD as income, but I contributed that entire amount (minus federal tax withholdings) to my personal IRA.  Can I deduct that amount (up to my limit)?

[lamurphy1946]

The 1099-R has a total distribution amount and a smaller taxable amount. It also shows an amount that was set aside for Fed taxes. Since this is all inherited from an IRA and  used to create a traditional IRA, am I correct in assuming that it is not taxable? also what happens to the Fed. tax amount that was withheld?

[VolvoGirl]

You get credit for the withholding taken out like W2 withholding.   But when you rolled it into your IRA did you replace the withholding with your own money?  If not then the withholding became a distribution and will be taxable.  Who did you inherit it from?  I don't know how inherited IRA work.  There are special rules.  @dmertz  

[lamurphy1946]

THE 1099-R REPRESENTS THE DISTRIBUTION FROM MY MOTHER'S ANNUITY/LIFE INSURANCE. I TOOK THE ENTIRE DISTRIBUTION AND CREATED AN IRA. NOT SURE THAT ITS A "ROLL-OVER".  I DIDN'T ADD ANYTHING TO THE DISTRIBUTION THAT CREATED THE IRA. IS THE WITHHOLDING USED AS A CREDIT LIKE W-2 WITHHOLDING?

[dmertz]

A distribution paid to you as beneficiary of your mother's annuity or life insurance is not eligible for rollover to any type of account, so what you did with the money is not relevant to the tax treatment of the distribution.  Putting this money into an IRA would therefore constitute a new, regular contribution to the IRA by you and you need to enter that new contribution in the Traditional and Roth IRA section under Deductions & Credits.

Yes, the amount in box 4 of this Form 1099-R is added to your withholding from other sources with the total credited on Form 1040 line 17 against your overall tax liability.

[VolvoGirl]

So then you also need to be eligible to make a IRA contribution.  Do you have enough earned income to make a contribution?  How much did you put into your IRA?  There is  max.

You can only contribute the smaller of

$6,000 ($7,000 if you are age 50 or older) -OR-

Your taxable compensation for the year.

IRS Pub 590-A IRA Contributions.  Bottom of page 8

https://www.irs.gov/pub/irs-pdf/p590a.pdf

[VolvoGirl]

You better read page 20 of publication 590A for inherited IRAs.

[dmertz]

The fact that box 2a of the Form 1099-R shows a number that is different from the number in box 1 indicates that the inherited account was not an IRA.