Inherited IRA YoD RMD Recording/Reporting

[elvisimpersonator]

BACKGROUND

My father passed in May and my sister and I were named equal beneficiaries on his IRA.  We both set up Fidelity Inherited IRAs (which required us to include his SSN and DoD) and successfully had Fidelity distribute the IRA assets to us.  We understand we are required to take the balance of his YoD RMD between the two of us and the tax burden for the balance of his YoD RMD is ours.  My sister elected to take the balance of his YoD RMD since she is in a lower tax bracket.  Subsequent year RMDs will be based on non-spouse 10-year rules

QUESTIONS

I assume my sister will receive a 1099-R for the balance of our father's YoD RMD, but how does the balance of our father's YoD RMD get reported against his required RMD?

Does that happen automatically or is it something we have to request from Fidelity?

Or is it simply something we have to manually fill out when we file his taxes? 

P.S.  We both have IRS POA on file (Form 2848) and have been assigned CAF numbers.  

[elvisimpersonator · Accepted solution]

COPILOT RESPONSE

I'm sorry for your loss. I'll do my best to help you with your questions about the Inherited IRAs and the reporting of your father's Year of Death (YoD) Required Minimum Distribution (RMD).

1. Reporting the Balance of YoD RMD: Your sister will indeed receive a 1099-R for the balance of your father's YoD RMD. This amount should be reported on your father's final tax return. The IRS requires that the final RMD be taken by the beneficiaries and reported on the decedent's final tax return.

2. Automatic Reporting: Fidelity will report the distribution to the IRS, but it is your responsibility to ensure that the amount is correctly reported on your father's final tax return. You may need to manually fill out the appropriate forms to report this distribution.

3. IRS POA and CAF Number: Since you both have IRS Power of Attorney (POA) on file and have been assigned a Centralized Authorization File (CAF) number, you should be able to handle the necessary tax reporting and communications with the IRS on behalf of your father's estate.

It might be a good idea to consult with a tax advisor to ensure everything is handled correctly and to avoid any potential penalties. They can guide you through the specific forms and steps needed to report the YoD RMD accurately.

[dmertz · Accepted solution]

COPILOT is entirely wrong.

Nothing about the completion of the YoD RMD is reportable on your father's tax return.  Any distribution paid to a beneficiary is reportable only on the beneficiary's tax return.

Any power of attorney you and your sister had with respect to your father ended upon his death.  The executor or personal representative of your father's estate has the responsibility to handle the estate.

[elvisimpersonator]

@dmertz Thanks.   

I confirmed my sister and I are both named as personal representatives in my father's will.  

I am reading through the IRS Tax Help https://www.irs.gov/newsroom/filing-a-final-federal-tax-return-for-someone-who-has-died

I also have access to personal legal services through my employer benefits.  

[fanfare]

Once retitled with your name as beneficiary, the executor can't take the RMD from an IRA you inherited, Only you can do that.

Since your sister took the total amount of the father's RMD, the requirement is satisfied.

See IRS Pub590-B for the info on how to calculate the RMD.

The rules for newly inherited IRAs are different since 2020.

Reply back if you need more details

You can rely on info from @dmertz 

@elvisimpersonator 

[Opus 17]

The distribution is reported to the IRS by Fidelity and in theory, they could match it up to your tax returns, or send a letter asking "did someone take the owner's RMD?" but this almost never happens.  It's basically on the honor system.    

In the future, you and your sister have two requirements: you must each take your own RMDs from your own inherited IRAs each year until the account is closed, and you must spend out the accounts and close them by the end of the 10th year after your father's death.

Someone will need to file your father's final tax return for 2024 (listing income up to, but not after, the date of his death).  His income does not include the RMD taken after death, that is the sister's income.  The POA dissolves on death, so one of you will have to go to the local probate court and be appointed the administrator or personal representative, to be able to file the final tax return.  If he received additional income after his death, that income belongs to his estate, which is a separate legal entity, and there are a couple of ways to handle it, depending on what it is and how much.