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I received something I've never gotten in all my years I've been doing taxes. Client has a 1099-R with income in box 1 and 2; no Federal tax withheld; a Box 7 code of 4; the IRA/SEP/SIMPLE box is checked.
Received the income (split between three heirs) from the death of his mother.
Having never seen this before (12 years in business), I am thinking that this is taxable income due to the IRA box being checked. I have found in research that payments from insurance proceeds is normally not taxable. But with this coming from an IRA, that it is taxable.
Anyhelp would be appreciated.
Learn something new every year.
Michael Mincemoyer
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They inherited an IRA and cashed it out (or took a distribution), its taxable income, yes.
I see them all the time.
♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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They inherited an IRA and cashed it out (or took a distribution), its taxable income, yes.
I see them all the time.
♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Your thinking is correct, it's taxable. Insurance proceeds aren't taxable but traditional IRA distributions always are.
Slava Ukraini!
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Thank you for the confirmation. These clients will have a surprise this year.
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Thank you for the information. A tax surprise awaits this client.
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@Forknowledge the bigger surprise is that you have been preparing tax returns for 12 years and this is the first one you have seen. Very common...routine type distribution. See several each year.
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Did the account owner have Basis? That goes along with the account distributions.
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I have seen many returns with "early distributions" brfore. I ha not seen any with the Box 7 code of "4" before.
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"I ha not seen any with the Box 7 code of "4" before."
Then you have not dealt with a Death and an inherited IRA to the beneficiary.
For nontaxable basis, for penalty, etc, it has its own treatment.
Don't yell at us; we're volunteers