inheritance money

lgriffin9061 · ‎April 18, 2023

I had $15k that was left to me in my dads credit union money market account. I closed that account and put that money in a individual TOD IRA. Do I need to claim that money as a contribution since I inherited it? When I put it in I am told that I have over contributed and will be penalized. How can I avoid that?

DianeW777 · ‎April 18, 2023

It depends. If the money was not in an IRA, then you were not allowed to roll it over into an IRA. If you do want to contribute to an IRA, then you can put in the maximum you are allowed.

Review the details in the link below if it was an IRA before you cashed it in and if you qualify to roll it into another IRA in your name.

Retirement Topics - Beneficiary

Maximum IRA Contributions for 2022 (if funds were not originally in an IRA):

For 2022, $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year.

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dmertz · ‎April 18, 2023

Yes, this is an IRA contribution, not a rollover.

Apparently you are not eligible to have made the IRA contribution. The excess contribution is subject to a 6% penalty every year unless corrected. As long as you file your tax return or request a filing extension by the end of today, April 18, 2023, you have until October 15, 2023 to obtain a return of the excess contribution to avoid the penalty.