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Hi and welcome to Just Answer!Sorry for your situation...Please be aware that...
1. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. However, interest income received as a result of life insurance proceeds may be taxable.2. Distribution from the inherited 401k account is your taxable income. It is not a subject of penalty - but still a subject of regular income taxes.3. Inheritance itself is not a taxable income – so all the money you inherited from your mother’s checking account – are not taxable.
Your filing requirements are based on your total taxable income and filing status - see IRS publication 501 page 3 - www.irs.gov/pub/irs-pdf/p501.pdf - Table 1. 2010 Filing Requirements Chart for Most Taxpayers. Thus if the taxable amount of 401k distribution is for instance $20,000 - you are required to file your tax return.Will or not you have any tax liability is determined when you file your tax return - but I may estimate if needed.
Ok, I will check the documents regarding her 401K and death benefits paid. The life insurance company (Cigna) made a mistake so paid part of benefit in Dec, and remainder in May of this year. I am almost certain they deducted something - I will get that documentation and continue with this.
I will also check the irs.gov website. Thank you very much, so far!
Take your time. Please be sure to verify the total amount of your taxable income - that is important because that amount affect your filing requirements.