Deceased Spouse with 3 year disaster IRA distribution

[nenaccountants]

I am preparing a tax return for a taxpayer whose spouse died in 2022.  The deceased spouse has a 3 year spread on a disaster IRA distribution, 2021-2023.  How is the third part handled that would normally be filed on the 2023 tax return?

[Just-Lisa-Now-]

The remainder goes on their final return.

[nenaccountants]

How is the 3rd portion (2023 amount) added into proseries?  The 2022 amount is flowing in penalty free.

[Just-Lisa-Now-]

it should do it automatically when you enter the date of death...was this a covid distribution? 

Those were taxable in 2020, 2021 and 2022, this would be the last year.

[nenaccountants]

No, this was a qualified disaster distribution 21-23.

[sjrcpa]

Unresearched opinion - I think it goes in 2023 estate 1041 for decedent.

[qbteachmt]

"If a taxpayer who spread the income from a qualified 2020 disaster distribution over 3 years dies before the last tax year of that 3-year period, the distribution may no longer be spread over 3 years. The remainder of the distribution must be reported on the return of the deceased taxpayer. Include the remainder in the line 13 and/or line 24 totals, as applicable, of your 2021 Form 8915-F.."

https://www.irs.gov/instructions/i8915f

[Just-Lisa-Now-]

thats what I was thinking of, but is that for ANY disaster distribution or only for the 2020 Covid one?  the OP says this was a 2021 disaster distribution.

[qbteachmt]

"is that for ANY disaster distribution or only for the 2020 Covid one?"

I agree, and the first thing I looked for is how it is worded. The IRS has very clearly differentiated "coronavirus" or covid disaster, from qualified disaster, as seen in the 8915-F instructions.

https://www.irs.gov/instructions/i8915f

"A coronavirus-related distribution can't be made after 2020. Also, a distribution is not a qualified 2020 disaster distribution or a qualified 2021 disaster distribution if it is listed in Distributions that are not qualified disaster distributions, later. See Limit, later, for the dollar limit on qualified disaster distributions."

https://www.irs.gov/forms-pubs/about-form-8915-f-qualified-disaster-retirement-plan-distributions-an...

IRS has instruction changes:

"If you downloaded the Instructions for Form 8915-F (Rev. January 2022), please be advised that those instructions have been replaced by the Instructions for Form 8915-F (Rev. February 2022) to correct the disasters listed in Appendix B under the Table for Qualified 2020 Disaster Areas. The revised instructions also address the lines on which to enter income on Form 8915-F for a decedent who has spread the income from their distribution(s) over 3 years and who dies before the 3-year period has ended."

"Reporting the remaining distribution amount when the taxpayer has died

On page 2, in the Caution under How Is a Qualified Disaster Distribution Taxed, we added this sentence: “Include the remainder in the line 13 and/or line 24 totals, as applicable, of your 2021 Form 8915-F.”

Please download the  https://www.irs.gov/pub/irs-prior/i8915f--2022.pdf for the revised text."

And: https://www.irs.gov/forms-pubs/update-to-form-8915-f-and-its-instructions-to-explain-the-treatment-o...

The last comment I want to make, that was nagging at me yesterday, was the 2021 tax year prep seemed to indicate there were no 2021 qualified disasters per the IRS process. I see nothing like this in the table of disasters. I wasn't going to fact-check the OP, though.

[nenaccountants]

The disaster is Hurricane Zeta in Mississippi in 2020.  I do see that listed in the instructions for Form 8915-F appendix B, revised Feb2022.  So I'm assuming that's a qualified disaster, and that the 2022 & 2023 allocations need to be added onto the 2022 return.  Basically allocating the remaining balance on the taxpayer's final return.

[qbteachmt]

"Basically allocating the remaining balance on the taxpayer's final return."

Yes, that is what the instructions tell you to do. If they died in the second year, there is no third year to carryover anything.

[qbteachmt]

This was the error: "No, this was a qualified disaster distribution 21-23."

Nope. It's a 2020 qualified disaster, but the distribution happened in 2021, apparently.