Question

I have a question about 1099-R distribution codes. I inherited part of my father’s retirement account and received a Form 1099-R. Do I have to report this as income?

Answer

You’ll report amounts from Form 1099-R as income. This is because it’s income in respect of a decedent.

Income in respect of a decedent is earned by a deceased person before death. However, it wasn’t paid to the person until after death. So, the income is taxable to the recipient in the year received.

Regarding 1099-R distribution codes, retirement account distributions on Form 1099-R, Box 7, Code 4 are still taxable based on the amounts in Box 2a. These show payment due to death of the account owner. However, the 10% penalty on early distributions isn’t applied as an exception for Code 4 distributions. Include the federal withholding amount reported in Box 4 as an additional withholding.

Types of income in respect of a decedent include:

  • Retirement accounts
  • Employee compensation
  • Bonuses
  • Benefit plan distributions
  • Partnership income
  • Interest and dividends
  • Gain on sale of property
  • Crops and livestock
  • Installment obligations
  • Royalties

 

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