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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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At what amount are you 1099 for an inharitance

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I was listed as a beneficary to receive 10% of a retirement account my aunt left. When her brother called the government said they wouldn't need my social sec # XXXXX the amount was not enough. What is the maximum amount one can receive without being taxed?

Any distributions you receive as a result of an inheritance of a retirement account are fully taxable as ordinary income.  Thus, the distributions you receive from a retirement account as a beneficiary are taxable just like interest and dividends at your marginal tax rates.  No 10% early distribution penalty will apply since you are receiving the distributions as a beneficiary.


As an IRA beneficiary you do generally, have the option to have your portion of the IRA set up in what is called a "beneficiary IRA".  This allows you the option to to take minimum distributions over your life expectency rather then a 100% distribution now.  Of course you can take higher distributions then the minimum but you have a great opportunity to build the account because the majority of the assets in this "beneficiary IRA" can be invested tax-deferred.  Consider this a good opportunity to build a retirement account.  By the way, you cannot comingle any other IRA assets you may have with this account.  You also cannot roll it over into a pension plan. 


If your Aunt's estate was required to file an estate tax return (i.e. Form 706) and if you do distribute the IRA and take it into income, you may be able to deduct as a miscellaneous itemized deduction the amount of estate tax paid attributable to your share of the IRA account.  Check with the estate administrator or executor to get this amount if available. 

     
Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: Here is the reply I received from my Aunt's brother. Does this make sense? The "guy" he is referring to is the government rep who is handling her retirement account.

Actually, the guy called me - after I gave him your address & telephone number, he sadi that he would call me back if he needed your social cecurity number, but he didn't think he would because the $$ amount wasn't big enough - sorry! :-(

It does not make any sense to me.  I do know for sure that if you receive any amount of  distribution of pre-tax dollars from a retirement account (whether inherited or not) you will be subject to tax on that amount as ordinary income.  You will not be subject to the 10% early distribution penalty since the reason you are receiving the distribution is because of the death of the account owner.


The only other possibility (its remote) is if you are receiving after-tax dollars (some plans allow after-tax contributions).  These would not be taxable but even so, they would still be reported as a distribution that has tax basis.


My inclination is that the "guy" your brother is talking with either doesn't know what he is talking about or the asset is not really a retirement account.  Regular 1099's generally are required to be issued when payments for the year exceed $600.  However, this hurdle does not apply to retirement account distributions.  A 1099 must be distributed for all retirement plan distributions, regardless of the amount distributed. 


I suggest you find out exactly what he is talking about (i.e. is this a 403(b) plan, a 457 plan or is this part of the governments pension program, etc.) so you can focus the question a little better.      

Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: Yes, sounds like her brother may be giving me the run-around. So again to confirm if there is $5.00 in it my ss# XXXXX still be required, right? For some reason her brother will not give me the contact info. btw, you're great and will forward you the money. So, again, even if it's 5 BUCKS they would still require my ss#.

Yes, so they may issue an accurate 1099-R.

Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: OK so we can wrap this up for now. Your guess on why "the guy" or HER brother would say no ss# XXXXX?
For a 1099-R (Retirement Plan Distributions) the requirement is to issue a 1099-R whenever the distribution is $10 or more.  So either the anticipated distribution amount is less then $10 or the "guy" does not understand the rules
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
Christopher Phelps and other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: I'm guessing $9.99 :(. Again, thanks for your help and I sent payment.

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