UKMustangFan Posted March 20, 2017 Share Posted March 20, 2017 Quick tax question for our resident tax accountants... When my grandmother passed away last year her IRA (traditional, not Roth) was split up between my Mom and her siblings. Instead of having the money put into an IRA in her name, my Mom elected to just take it as a distribution. She paid a 10% early withdrawal penalty. She did not receive a 1099 for it. My question is, since it's an inheritance, does she a) have to report it on her taxes, and b) is it taxable? Also, if she does, where/how do I enter it on TurboTax? Link to comment Share on other sites More sharing options...
littleluck55 Posted March 20, 2017 Share Posted March 20, 2017 (edited) She does not have to pay the 10% early withdrawal penalty. As a non-spouse beneficiary, the funds would have needed to transfer to an inherited IRA or IRA-BDA. Once in the inherited IRA, she could have taken a full distribution. If not a full distribution, she would have had to take the mrd each year if your grandmother was over 70 1/2. The distribution should have come from an inherited IRA. There should have been a 1099R with a distribution code of 4, which is a death distribution. She definitely needs to pay taxes on it. Non-Spouse IRA Beneficiary? - Fidelity That being said, I am not a tax consultant or an accountant. So, maybe someone who is can chime in to verify. I may be wrong about the IRA-BDA but our firm requires it for the distribution. Edited March 20, 2017 by littleluck55 Link to comment Share on other sites More sharing options...
UKMustangFan Posted March 29, 2017 Author Share Posted March 29, 2017 Another tax question.... My brother and his ex split daycare expenses for their daughter. She already filed her return and claimed her portion of these expenses. I filed his return and claimed his portion. It was rejected and the reason given was that someone else had already filed a return with child care expenses for that SSN. Can only one of them claim the daycare expenses? @Watusi, you're an accountant aren't you? Link to comment Share on other sites More sharing options...
lawildcat Posted March 29, 2017 Share Posted March 29, 2017 Another tax question.... My brother and his ex split daycare expenses for their daughter. She already filed her return and claimed her portion of these expenses. I filed his return and claimed his portion. It was rejected and the reason given was that someone else had already filed a return with child care expenses for that SSN. Can only one of them claim the daycare expenses? @Watusi, you're an accountant aren't you? It can only be claimed on one return. They should rotate tax years. I should add that there are rules in place detailing this - I think it's called the tiebreaker rule or something. Can Two or More People (such as Divorced Parents) Claim the Same Child as a Dependent? Only one taxpayer may generally claim any one person as a dependent on a tax return (except, of course, in the case of a married couple filing jointly). If you file your tax return and someone else has already claimed your dependent, then the IRS will apply the tiebreaker rules. There may be an exception when the splitting of tax benefits for a dependent is detailed in a legal divorce decree. If you have such a decree, you will need to file your tax return on paper and attach the relevant pages of the divorce decree, including the first page and the signature page. What Do I Do If Someone Claimed My Dependent? Has your efiled tax return come back rejected because someone else (such as an ex-spouse, grandparent, or another taxpayer) claimed your child as their dependent on their tax return? If you efile your tax return and someone has already claimed your dependent, the IRS will reject your return. This does not necessarily mean that you do not have the right to claim the dependent, but the IRS systems cannot apply the tiebreaker rules on an electronically filed return. If this is the case, you will need to mail your tax return to the IRS. When you prepare your return on efile.com, you can just print a completed copy from your account and mail it to the IRS to file it. The IRS will then be able to apply the tiebreaker rules. Link to comment Share on other sites More sharing options...
NamecipS Posted March 29, 2017 Share Posted March 29, 2017 She does not have to pay the 10% early withdrawal penalty. As a non-spouse beneficiary, the funds would have needed to transfer to an inherited IRA or IRA-BDA. Once in the inherited IRA, she could have taken a full distribution. If not a full distribution, she would have had to take the mrd each year if your grandmother was over 70 1/2. The distribution should have come from an inherited IRA. There should have been a 1099R with a distribution code of 4, which is a death distribution. She definitely needs to pay taxes on it. Non-Spouse IRA Beneficiary? - Fidelity That being said, I am not a tax consultant or an accountant. So, maybe someone who is can chime in to verify. I may be wrong about the IRA-BDA but our firm requires it for the distribution. I believe you are correct. Link to comment Share on other sites More sharing options...
UKMustangFan Posted March 29, 2017 Author Share Posted March 29, 2017 It can only be claimed on one return. They should rotate tax years. I should add that there are rules in place detailing this - I think it's called the tiebreaker rule or something. Can Two or More People (such as Divorced Parents) Claim the Same Child as a Dependent? Only one taxpayer may generally claim any one person as a dependent on a tax return (except, of course, in the case of a married couple filing jointly). If you file your tax return and someone else has already claimed your dependent, then the IRS will apply the tiebreaker rules. There may be an exception when the splitting of tax benefits for a dependent is detailed in a legal divorce decree. If you have such a decree, you will need to file your tax return on paper and attach the relevant pages of the divorce decree, including the first page and the signature page. What Do I Do If Someone Claimed My Dependent? Has your efiled tax return come back rejected because someone else (such as an ex-spouse, grandparent, or another taxpayer) claimed your child as their dependent on their tax return? If you efile your tax return and someone has already claimed your dependent, the IRS will reject your return. This does not necessarily mean that you do not have the right to claim the dependent, but the IRS systems cannot apply the tiebreaker rules on an electronically filed return. If this is the case, you will need to mail your tax return to the IRS. When you prepare your return on efile.com, you can just print a completed copy from your account and mail it to the IRS to file it. The IRS will then be able to apply the tiebreaker rules. It's his year to claim her, and his ex did not attempt to claim her as a dependent. She simply claimed her portion of the daycare expenses, because H&R Block told her they could split them. Now when I file his, it won't allow it, because her (his daughter) SSN is already on a child care credit form from another already filed return (his ex's). Link to comment Share on other sites More sharing options...
lawildcat Posted March 29, 2017 Share Posted March 29, 2017 It's his year to claim her, and his ex did not attempt to claim her as a dependent. She simply claimed her portion of the daycare expenses, because H&R Block told her they could split them. Now when I file his, it won't allow it, because her (his daughter) SSN is already on a child care credit form from another already filed return (his ex's). Pays to file early! He is going to have to paper file now, I believe. Link to comment Share on other sites More sharing options...
plantmanky Posted March 29, 2017 Share Posted March 29, 2017 It's his year to claim her, and his ex did not attempt to claim her as a dependent. She simply claimed her portion of the daycare expenses, because H&R Block told her they could split them. Now when I file his, it won't allow it, because her (his daughter) SSN is already on a child care credit form from another already filed return (his ex's). 1. Never use H&R block, ever, ever, ever ever ever, ever. 2. Im pretty sure only one of them can claim expenses, and its the one claiming the child as a dependent in that tax year. (granted Ive been out of the Personal tax side of things since 2011 so if something has changed since then its possible.) 3. Did they reject him claiming the child as a dependent? or was it just the child care expenses that were disallowed? Link to comment Share on other sites More sharing options...
plantmanky Posted March 29, 2017 Share Posted March 29, 2017 Pays to file early! He is going to have to paper file now, I believe. That may not clear it up completely but yes he will have to paper file with a copy of divorce decree showing its his year to claim the dependent and all expenses. Link to comment Share on other sites More sharing options...
UKMustangFan Posted March 29, 2017 Author Share Posted March 29, 2017 1. Never use H&R block, ever, ever, ever ever ever, ever. 2. Im pretty sure only one of them can claim expenses, and its the one claiming the child as a dependent in that tax year. (granted Ive been out of the Personal tax side of things since 2011 so if something has changed since then its possible.) 3. Did they reject him claiming the child as a dependent? or was it just the child care expenses that were disallowed? 3. No. She only claimed that their daughter lived with her for 5 months out of the year, and he put 7 months so that he could claim her since it's his year. If I remove all child care expenses from his return for the year, the efile should go through. Probably be less of a headache for him to simple remove it, file without any child care expenses and then have her cut him a check for the $ he would've gotten back had she not claimed the expenses, right? Link to comment Share on other sites More sharing options...
UKMustangFan Posted March 29, 2017 Author Share Posted March 29, 2017 That may not clear it up completely but yes he will have to paper file with a copy of divorce decree showing its his year to claim the dependent and all expenses. Let's say he just decides to not claim the daycare expenses....Why would he have to paper file? Link to comment Share on other sites More sharing options...
lawildcat Posted March 29, 2017 Share Posted March 29, 2017 Let's say he just decides to not claim the daycare expenses....Why would he have to paper file? He would only have to paper file if he wants to claim that deduction. Link to comment Share on other sites More sharing options...
UKMustangFan Posted March 29, 2017 Author Share Posted March 29, 2017 He would only have to paper file if he wants to claim that deduction. That's what I figured...Probably be easiest to just do that and try to get her to write him a check for what he would've gotten otherwise. Let her deal with the IRS when the question why she took a credit she wasn't entitled to. Link to comment Share on other sites More sharing options...
lawildcat Posted March 29, 2017 Share Posted March 29, 2017 That's what I figured...Probably be easiest to just do that and try to get her to write him a check for what he would've gotten otherwise. Let her deal with the IRS when the question why she took a credit she wasn't entitled to. The IRS isn't going to question it at all unless he claims the deduction and they see the discrepancy. Link to comment Share on other sites More sharing options...
UKMustangFan Posted March 29, 2017 Author Share Posted March 29, 2017 The IRS isn't going to question it at all unless he claims the deduction and they see the discrepancy. You may be right. It's my understanding that only the parent claiming the child as a dependent is allowed to take the deduction. :idunno: This is why I hate taxes and got out of public accounting. :lol2: Link to comment Share on other sites More sharing options...
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