My mom died on Jan. 8. I guess I'll have to file two final returns for her: 2023 and 2024. Should I enter the "unrecovered investment in pension" this year or next year?

[arendg1]

(A letter from pension plan letter said it "may be recovered against taxable income for 2024 or by revisiting a prior year's tax return.")

[ThomasM125 · Accepted solution]

The unrecovered investment in pension would represent the portion of pension distributions that would not be taxed as it is a return of non-deducted contributions to the plan. I'm not sure why you received a letter as opposed to seeing the amount being reported in box 5 (employee contributions) on a Form 1099-R for a pension distribution. Since you use the amount to reduce the tax on pension distributions, you could use it in either or 2023 and 2024 depending on when there were distributions taken from the plan. 

Can you clarify if there was a distribution reported on a Form 1099-R in 2023, and if there was what value is in box 1, 2(a) and 5 so we can get a better idea of how the distribution is reflected on the Form 1099-R? Also, what distributions will be taken in 2024.

I am sorry for your loss.

[arendg1]

Thank you.

Yes, there was a distribution on Form 1099-R in 2023 (as well as many years prior).

-Box 1 is $22,660.80

-Box 2(a) is $22,257.96

-Box 5 is $402.84

Distribution in 2024: $487.33

[DianeW777]

Since your mother died in 2024, then the unrecovered amount will be reported in 2024, if a tax return is required to be filed. 

In 2023, you will report the 1099-R exactly as it was reported on your mother's 2023 tax return. She should also receive a 1099-R for 2024, even though you did receive the letter from the Pension Plan Administrator.  When you prepare the 2024 tax return, you will include the amount she received before death.

• Filing a final tax return for a person who died
• IRS Publication 575 (cost or investment in the contract)

Any portion of the distribution in 2024 that represents her cost in the plan (money she put in that she did pay tax on - called 'after tax'), can be used to reduce the taxable amount of her final distribution.

I also would like to send my sympathies to you and your family.

@arendg1