Finance Questions? Ask a Financial Expert for Answers ASAP
Welcome and thanks for your question!
My condolences on your mother's passing.
Did the estate receive any income after your mother passed away or did it pay out any expenses?
If the estate's income was more than $600, then it is required to file a Form 1041.
The Roth IRA income would not be taxable, though.
Was the interest more than $600?
You would need to consult with any tax forms that might have been received. Any forms probably would have been in your mother's name and social security number. If that's the case, you would need to allocate any income received after her passing to the 1041 return. For example, if she received a 1099-INT form reporting $120 in interest for all of 2012, you would report $100 on her final 1040 and $20 on the 1041.
A 1041 may not be required if there isn't sufficient income.
If no withdrawals were made from the Roth IRA before it was transferred to the beneficiaries' names, the estate has no income from the Roth IRA. The inherited IRA is your money, not the estate's.
If you and not the estate received the interest income, likewise, that is not considered the estate's income. It is considered your individual income.
Neither of these two things would create income for the estate that would necessitate filing a 1041.
Schedule D on whose return?
No, that is not considered interest.
Based on the circumstances you have described to me, it really does not sound like there is any income that would need to be reported in a separate EIN.
Life insurance is not taxable.
RMDs are required for inherited Roth IRAs. You can't let the money just sit there.
You will need to take one for 2013.
Only estates that are required to file a 1041 income tax return need an EIN. Not all estates have to file a 1041. Based on what you have described to me, the estate itself did not have any income. it seems like all the income-producing assets were transferred pretty seemlessly to the owner.
If you obtained an EIN, that's fine, but like you said, the IRS now expects you file a return for EIN.
If there is no income to report, there is no income to report and the EA can file a zero return for you.
Yes, you can call them.
There is nothing preventing you from taking a larger withdrawal than the RMD. As long as you withdraw at least the RMD, there isn't going to be any sort of penalty.
Roth IRA distributions are not going to affect your income tax. They are not considered taxable income so are not going to affect your tax bracket.
You have to take at least an RMD from the Roth IRA.
Yes, even the interest it has earned. The only situation in which the interest earned would be taxable would be if your mom's Roth IRA account was less than 5 years old. In that case, the portion of the withdrawal attributable to the earnings of the IRA would be taxable.
You aren't required to take an RMD in the year of death. They begin in the year following the original account owner's death.
So, for 2012 you wouldn't have been required to take an RMD but for 2013 you will.
You don't have to hold the money for 5 years. Your mom had to have opened the account at least 5 years prior to her passing.
Ok, I just realized I transposed the digits in your mom's age. I see that she was 57 instead of 75 like I thought. In that case, you do have the option of the 5 year rule, meaning no RMDs and withdrawing the assets in full before the 5 years are up.
I apologize for any confusion caused by my misreading your question.
5 years meaning by December 31, 2017.
No - I apologize for the confusion. Different rules apply based on if the deceased was under or over age 70 1/2 at the time of their death.
Since your mom was 57, the five year rule applies and you don't have to take a RMD as long as you withdraw all the funds by December 31, 2017.
RMDs would only be required if your mom was over age 70 1/2 or if you chose not to use the 5 year rule. I apologize that I misread her age.
No RMD applies.
You can wait the 5 years.
There aren't any penalties.
The penalties only apply when RMDs were required and not taken.
In your case, no RMD is required so there is no penalty.
Roth IRA distributions are not taxed so they do not raise you tax bracket.
You can withdraw the money as you choose, as long as the last of it is withdrawn before December 31, 2017.
The closing letter is related to the 706 not the 1041.
I think somewhere along the line the requirements for Form 706 and Form 1041 confused. Form 706 is attached to the decedent's social security number. Form 1041 is attached to a EIN number. If you look at 706, there isn't even a spot to fill in the EIN number.
You may have needed a EIN for the estate for purposes other than tax filing.
When you file an application for the EIN#, the IRS has no way of knowing whether there will be a situation that necessitates filing the return. They just assume you do unless you tell them otherwise.
If you call them and explain the situation (that the estate had no income), they should be able to take care of getting that closed up.
You're welcome. I understand dealing with estate issues can be confusing, especially at such a difficult emotional time.
I'm glad that I could be of some help to you.
You can bookmark this answer so that you come back to this.
Unfortunately, I'm not familiar with the registration in the site and what the process is when you come back to answer future questions.
The answer won't erase.
Same to you.
Rate and exit, please.