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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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My dad recently died and he left me an ira which I had to close

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My dad recently died and he left me an ira which I had to close and liquidate to get the money because I have been unemployed and not worked this year. The money was about 23,000. I paid no taxes on the money when I liquidated it either state or federal. If this plus my other income is less than 24,000 about how much do you think I will have to pay when taxes are due, percentage wise?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

Hi and welcome to Just Answer!

Sorry for your loss...

While distributions from inherited IRA accounts are not subject of early distribution penalties - these distributions are still subject of income taxes.

If you will take a distribution from the IRA - the income in question is classified as an income in respect of a decedent (IRD).
Income in respect of a decedent realized AFTER the death is taxable. Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return.
Income in respect of a decedent must be included in the income of one of the following.
--The decedent's estate, if the estate receives it.
--The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it.
--Any person to whom the estate properly distributes the right to receive it.

If you are a beneficiary of that account - you should include distributed amount into your tax return.

For distribution - you should receive reporting form 1099R - and report on form 1040 as following:
line 15a - total distribution - from 1099-R box 1
line 15b - taxable part of distribution - from 1099-R box 2a.
line 62 - federal income tax withheld - if any - from 1099-R box 4.

 

Assuming you are single below 65 standard deduction, no other deductions or credits - with total taxable income $24,000 - your estimated federal income tax liability would be ~$1700 and ~$500 in estimated SC state income tax liability.

You may reduce your tax liability by spreading distributions over several years.

 

Let me know if you need any help.

Be sure to ask for clarification if needed.

 

Customer: replied 1 year ago.

The ira was not transferred to me until after he died and I didn't take any money out until then so your saying on 24,000 with no other income I can expect total taxes to be almost 10%?

Expert:  Lev replied 1 year ago.

That is correct based on your information.

Your estimated tax liability on gross income $24,000 is federal income tax liability ~$1700 and ~$500 in estimated SC state income tax liability - total ~$2200 - overall a little less than 10% because of your income level.

Please be aware that is a very raw estimate. To be précised you need to prepare your tax return.

Be sure to put some money aside to cover your tax liability.

Let me know if you need any help.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22617
Experience: Taxes, Immigration, Labor Relations
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