Will I be declaring income twice on the same IRA funds?

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95 year old mother dies leaving an IRA. I am 55 so I requested a transfer-to-transfer nonspouse inherited IRA from her bank to my bank.  Her bank mistakenly sent a persoanl check to my bank instead and admits this error.  So now I have a 1099-R from her bank.  And I have an inherited IRA (w/ both names) from my bank.   Will this banking error have me declaring income twice on the same IRA funds in the long run?  The first time will be with the 1099-R.  The second time will be with the required RMD of the IRA for each year starting 2017 taxes.

[dmertz · Accepted solution]

If the her bank sent a check made out to you personally, you have received a distribution from her IRA (which should have been reported to you on a code 4 Form 1099-R) that is not eligible for rollover and therefore not eligible to be deposited into an inherited IRA.  The deposit of that check into an IRA constitutes a new regular contribution to an IRA owned by you, not an inherited IRA, despite the titling of the account, and is an excess contribution to the extent that you are not eligible to make the new regular contribution.  Any excess contribution is subject to a 6% excess contribution penalty each year the excess remains in the account.

You may have a legal case against your mother's bank.  It may be wise to seek legal counsel.

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Excellent explanation.  I understand what to expect. now.  Thank you for your patience!