I have a 401(k) through my employer and my wife gets distributions from an IRA she inherited. Do I enter her disitrubtions where it asks for them in the interview? We know she got more than the RMD each year for 2022 and 2023.
Thanks!
Q. Re: Saver's Credit and Distributions from an inherited IRA. Do I enter her distributions where it asks for them in the saver's credit interview?
A. Apparently, No.
From the form 8880 instructions for line 4:
"Don’t include any of the following.
• Distributions from an inherited IRA by a nonspousal beneficiary"
https://www.irs.gov/pub/irs-pdf/f8880.pdf
Good question. I didn't know this until I just looked it up and had assumed otherwise.
That's a different subject.
Q. Why are they taxing her whole distribution of $7,304 instead of just what's over the RMD?
A. It sounds like you have a misunderstanding of what RMD is. RMD is not tax free. It just means you HAVE TO take that much out (and pay tax on it) each year.
Yes. Her distributions are reported on a 1099-R. Where do I enter a 1099-R? You won't get a Saver's credit if you have had distributions.
When going through the Saver's credit interview, the information about the distributions should automatically populate if you have entered her 1099-R(s). But if not, you should enter the amounts of distributions for tax years 2021-2024.
Q. Re: Saver's Credit and Distributions from an inherited IRA. Do I enter her distributions where it asks for them in the saver's credit interview?
A. Apparently, No.
From the form 8880 instructions for line 4:
"Don’t include any of the following.
• Distributions from an inherited IRA by a nonspousal beneficiary"
https://www.irs.gov/pub/irs-pdf/f8880.pdf
Good question. I didn't know this until I just looked it up and had assumed otherwise.
Thanks Champ! Ahhh! I see that in the instructions. I just didn't know the form number. Now, why are they taxing her whole distribution of $7,304 instead of just what's over the RMD?
That's a different subject.
Q. Why are they taxing her whole distribution of $7,304 instead of just what's over the RMD?
A. It sounds like you have a misunderstanding of what RMD is. RMD is not tax free. It just means you HAVE TO take that much out (and pay tax on it) each year.
"You won't get a Saver's credit if you have had distributions."
That's a very misleading statement. Distributions from your own qualified retirement accounts, your spouse's qualified retirement accounts and any qualified retirement accounts inherited from a spouse reduce the amount of new retirement contributions that qualify you or your spouse for the credit, but, depending on the amount involved, that won't necessarily eliminate the credit.