I inherited the money I used to open this IRA from my father’s IRA, does this count as inherited IRA even though his name is not on the account?

[lauramcmaster]

My dad’s IRA sent me a check that I took directly to Edward Jones and opened a new IRA with it.

[fanfare]

Once you cash the check for other purposes, the inherited IRA with decedent as owner is dissolved.

@lauramcmaster 

[dmertz · Accepted solution]

You used cash from the (generally taxable) distribution from the inherited IRA to make a regular contribution to your own IRA, subject to annual contribution limits.

The only way that this could have been an inherited IRA is if the money was moved by non-reportable trustee-to-trustee transfer, meaning that the check would have had to have been made out to a receiving inherited IRA for your benefit, not to you personally.  The titling of an inherited IRA for your benefit would have had both your name as the one for whom the account is maintained and your father's name as the original participant.

[Opus 17]

How much money?  If more than $7000 (or more than $8000 if you are over age 50) that will affect the answer.

We need to know if your father's IRA was cashed out, or if this was a rollover of some kind (which might have been improper).  And if it was cashed out, who will pay the tax, you or the estate?

If it was some kind of rollover, it may have been done improperly, or I might be misunderstanding what happened.  

[lauramcmaster]

Dad’s IRA was cashed out to me and my brother, each got half. I took the check they sent to me and opened the IRA in my name, it was about $30,000, and taxes were taken out before I got the check. 

[dmertz · Accepted solution]

This definitely constitutes a regular contribution to your own IRA and if you put all $30,000 into an IRA, you certainly have made an excess IRA contribution subject to excess-contribution penalties unless corrected.  The distribution made to you and your brother was not eligible for rollover to an inherited IRA even if it had been deposited into an inherited IRA titled as being for you as beneficiary and your father as the original participant and still would have resulted in an excess contribution.

If you made this deposit in 2023 (or in 2024 as a 2023 contribution, which seems unlikely under the circumstances), you have only until October 15, 2024 to obtain a return of the excess contribution (assuming that by April 15, 2024 you either filed your 2023 tax return or requested a filing extension).

[Opus 17]

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@lauramcmaster wrote:

Dad’s IRA was cashed out to me and my brother, each got half. I took the check they sent to me and opened the IRA in my name, it was about $30,000, and taxes were taken out before I got the check. 

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This is a regular contribution, your maximum limit for all IRA accounts (including any other IRAs you own, but not including workplace plans like 401ks) is $7000, or $8000 if you are age 50 or over.  The excess needs to be removed.  If this was done in 2023, you must remove the excess by October 15, 2024.  When you remove the excess, you must also remove the income earned by the excess, and since the excess was for 2023, the income is reported on your 2023 tax return even though it is paid in 2024.  So you probably have to file an amended 2023 return.

If you made the excess contribution in 2024, you have until April 15, 2025 to remove the excess, but because of the taxability issue of the earnings, it would be better to remove the excess before December 31, 2024.

In all cases, "removal of excess contribution" is a special procedure, not a regular withdrawal, and you need to contact the IRA custodian ahead of time.  They should not have accepted more than $8000 unless you incorrectly told them it was a rollover, so you need to correct their records on that issue as well, so that it shows on their records as a regular contribution.