1099-R, Code 4 Question

Forum|Forum|4 years ago
March 6, 2022
1 reply
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I have a non-spousal inherited Roth IRA from a relative who died in 2020. Everything I see online, and have been told by my financial advisor, indicates that disbursements I take from this account, if done in the 10 years following death, are non-taxable. This year I received a disbursement of $7,000. The 1099-R I received lists that amount in boxes 1 and 2a. 2b is checked as is the IRA/SEP/SIMPLE box. Box 7 code is 4.

When I entered this 1099-R into Turbo Tax, my projected refund dropped by approximately $1,500, and when I look at the income summary, the $7,000 disbursement is being listed as income. Can anyone explain what's going on and provide suggestions on how to get Turbo Tax to not view this as income? I did read in another post that I need to be aware of confusing wording on the question about is the IRA inherited from the payer (financial company is listed as opposed to relative). I initially said no, but have changed to yes, which then allows me to list my relative's name. Both approaches to that question resulted in the same loss in my refund total.

FangxiaL

Level 10

There is no penalty if you are under 59 1/2, but if it is a Traditional IRA funded with pre-tax dollars, you will be taxed on the distribution.

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rusty2021

Level 2

I am the Adm of my brother's estate. I received a 1099 form with a distribution code 4. The ira/sep box is checked. The account was closed to settle the estate and the funds were distributed to a beneficiary who is 90 years old. I withheld 20% of the funds for taxes before distribution. I'll have to file a 1041 for the estate. How should this income be reported? There were some losses on the sale of the stocks held in the account. Will the money provided to the beneficiary be taxable? Thank you.

dmertz

Level 15

This income is reported on Form 1041 line 8, Other Income. It's also reported in box 5 of the beneficiary's Schedule K-1 (Form 1041) for taxation on the beneficiary's individual tax return. Capital losses will be passed through separately in box 3 or 4 as appropriate.

It was a mistake to have taxes withheld. The credit for tax withholding cannot be passed through on the Schedule K-1, so the estate will need to receive any tax refund it is due and will pay that to the beneficiary when it is received.