In 2020 I closed out an Inherited IRA after receiving RMDs for 5 years. The 1099-R I received has the same amount in Box 1 - Gross Distribution and Box 2b - Taxable amount. I closed the account (knowing I would owe taxes) and divided it amongst our children who were out of work due to Covid. Do I report this by checking "some or all of this withdrawal was an RMD" or "None won this withdrawal was an RMD"?
Delete the form and start again. Answer that the withdrawal was not RMD since the RMD was not an issue in 2020.
I did that and it now asks for how much would have been the RMD.
it doesn't matter which way you answer and that is because you are not trying to do any rollovers.
Thank you. I did just that. I was over thinking the problem. For instance: how much am I going to be penalized for early closing the account. Don't really care.
This was a veery small IRA inherited when my father passed in 2015. Between my husband and myself, we have 6 grown kids. All but one were experiencing financial problems during Covid shutdowns. It was going to them eventually anyway. I realized my Dad would have wanted me to help them now when they really needed it instead of them dividing it up after I'm gone. So, I'll let the IRS tell me what the penalties are and pay them. My kids needed help now and not in normal times. They're all back to work and thanking Grandpa for helping them.
Check your Form 1040 line 38 for a possible Estimated Tax Penalty.
It is probably zero.
Other than that, there is no penalty for closing out an Inherited IRA at any time you choose.