October 10, 2019 at 11:51 pm #4688
My late husband’s IRA was transferred/combined to my IRA this year.
May I also add the amount of his Non Deductible IRA to mine when I file the taxes next year? Thanks.October 11, 2019 at 3:49 pm #4691
Sorry to hear of your loss.
If he made non deductible contributions reported on your joint return on Form 8606, you do inherit the remaining basis in his IRA. Add that basis to any basis you already have in your own IRA, and show the inherited amount on line 2 of your 8606. You do not have to complete an 8606 until you otherwise would need to, such as taking a distribution or RMD. Show the amount of inherited basis on line 2 of that 8606.
Note that while there may be non deductible contributions, there is no such thing as a non deductible IRA, even if all his ND contributions were made to the same IRA. Since those contributions were made there would be pre tax earnings generated in that IRA, and for tax purposes if he had more than one IRA account, they are treated as a single IRA. Form 8606 applies to all IRAs owned by each taxpayer.
If you need any assistance with RMDs including any RMD he did not take for the year of his death, please advise.October 11, 2019 at 6:43 pm #4693
Thank you Alan. Appreciate your help. I had taken all of his RMDs minimum requirement for 2019. He passed away in Dec 2018 and all IRA/401K were transferred to me in April/May 2019.October 12, 2019 at 2:38 pm #4696
If he passed in 2018, you needed to complete his 2018 RMD. Perhaps you meant that you did that in 2019, but if so, you should have filed a 5329 for 2018 requesting waiver of the penalty. The IRS will grant that waiver, especially for deaths late in the year.
However, for the year 2019 you are treated as if YOU owned the IRA the entire year. If so, you would only have a 2019 RMD if you will have reached 70.5 by the end of 2019. If you are not yet 70.5. then you will have no RMD due for 2019 for the IRA.
As for the 401k that you rolled over, since you cannot own the 401k until the balance is in an IRA, the plan should have distributed to you a beneficiary RMD for 2019 and not included it in the rollover amount. That beneficiary RMD would be based on your age at the end of 2019. Therefore, the 401k is handled somewhat different than the IRA. Since that plan administrator knows both your ages, they should have handled the RMDs automatically when you did the rollover.October 12, 2019 at 9:50 pm #4697
His 2018 RMDs were taken out in October 2018 before his passing.
I took all his 2019 RMDs and mine ( I am over 70 1/2) last week because the companies deadline are Nov 15, 2019.
Like you said, I thought since the IRAs/ 401Ks are in my name, they should be calculated as my age but no one wanted to recalculate them. I knew what the percentage should be but I am afraid I will have problem with the IRS so I just did whatever the investment companies said and withdrew his RMDs that was calculated in Jan 2019 when the year end statement were mailed.
I don’t have an accountant, as I usually do our taxes with Turbotax since our taxes are simple, no rental properties.
Now since you mentioned about 401K are supposed to be handle differently than IRA, I am confused and worried.
What should I do ? He had two 401Ks and both already switched to my name by the companies.
Didn’t the companies should have known it and told me to rollover to IRAs? Or maybe every company has different rules about 401K ?
Thanks Alan.October 13, 2019 at 2:07 am #4698
Once you had the 401k accounts retitled with you as beneficiary, the 2019 RMD is calculated using your age and Table I. If the plan failed to recognize that, they made an error. The correct beneficiary RMD using your age would be larger than your husband’s as the owner of the plan. So the RMD you received was probably too low. Perhaps the plan will realize this at some point, but if you do not hear anything from the plan, you should not have to take any action. How is it that both 401k plans could have made the same error? That is highly unlikely, so perhaps some info is missing.
All of this 401k money has now been rolled into an IRA titled with you as owner, correct? If not, and the IRAs show you as the beneficiary, you should have them retitled. Your husband’s name should not show on these IRAs created by the rollovers from the 401k plans.
By law, the 401k must allow you to do a direct rollover to your own IRA.
If you also inherited an IRA that was his IRA all along, the rules are different. In that case you can elect to be treated as the owner (if you are the only beneficiary), and for 2019 your IRA RMD would be calculated using Table III. In 2020, if all the accounts are in owned IRAs, all the RMDs will be calculated using Table III.October 13, 2019 at 2:43 am #4699
His IRAs were transferred to my name only so everything were fine since I am the only beneficiary.
The 401Ks also were transferred to my name only ( still as 401K, not IRAs)so I thought everything were fine, till you mentioned it.
I will call both companies on Tuesday then. I am also surprised why they made the same mistakes as both are big corporations.
Can you tell me how long is the timeline for me to rollover his 401K to IRA ? I hope I still meet the deadline.
Thank you so much Alan.October 13, 2019 at 11:59 pm #4702
There is no deadline to request a direct rollover to your own IRA, however it should be done before year end or your 2020 401k RMD will be larger than the RMD from your IRA if you rollover it over to an IRA this year.
Another benefit of doing this rollover is the RMD treatment of YOUR beneficiaries after you pass. If you leave this as an inherited 401k account, their RMDs would have to continue based on your age instead of being based on their presumably younger ages.
When you say that both the IRA and the 401k were transferred to your name only, since you cannot be the owner of the 401k, only a beneficiary, this suggests that all of these accounts merely list you as the beneficiary of your husband including the IRAs. Again, you cannot become the owner of an inherited 401k, you can only continue as beneficiary. You CAN become the owner of an IRA inherited from your spouse. Therefore, you should get the 401k rolled over to an IRA titled with you as the owner. When all is completed you would own just one IRA combining all these accounts into a single owned IRA.
If the 401k accounts are administered by the same firm, that might explain their error with the 2019 RMD. Is your IRA also with that firm, or with another firm?October 14, 2019 at 1:26 am #4703
The IRAs are with different firms than 401Ks. One was transferred combining it to my own IRA.
The other one was transferred to a new IRA in my name because I didn’t have IRA with them.
Hope these are ok.
Thanks.October 14, 2019 at 2:39 pm #4709
OK, so now you no longer have any inherited 401k accounts because both plans have now been rolled into IRAs that you own. The 401k plans have evidently paid out your 2019 beneficiary RMD before the transfers. If these beneficiary RMDs were the same amount that your husband was scheduled to take for 2019, they were probably more than the correct RMD. The IRS will not care about that, they only care if you receive less than the correct RMD.
For 2020, your IRA RMDs will be based on your age at the end of 2020 and calculated using the 12/31/2019 IRA balance. I assume that you do not have a Roth IRA or that your husband did not have a Roth 401k balance. Any Roth IRA you own is not subject to RMDs.
- You must be logged in to reply to this topic.