" Not having the IRA box checked may have an adverse tax affect with some tax programs?" | Ed Slott and Company, LLC

" Not having the IRA box checked may have an adverse tax affect with some tax programs?"

I chose not to have on line access for security. We don't do any account actions or banking on line. I could ask for Custodian’s copy of the completed IRA paperwork. But, what did you mean when you said " not having the IRA box checked may have an adverse tax affect with some tax programs?" And is there any way around that?

This is regarding earlier question: IRA/Inherited IRA paperwork was filled out, and they have assured me they will show code 4 on the 1099 to indicate Death Distribution for any RMD withdrawals from this account. IRA account has now been transferred due to death as an Inherited Traditional IRA.The title of the new inherited IRA shows the decedent's name (and parenthetically says "Deceased") and the Beneficiary's name (and parenthetically says "Beneficiary") but it does not say IRA anywhere in the title-- is this okay? Thank you again.

Due to complexity in the tax code with respect to taxation of distributions from different types of retirement accounts, tax software is written to address those differences. The IRA box is used to identify the account as a TIRA, SEP or SIMPLE IRA (but not a Roth IRA), so when the check is entered into a tax program it will generate the correct taxable amount, forms and penalties. For Q and A programs it will generate the correct questions that apply to IRA accounts, but not for other types of retirement accounts. If you get a 1099R for an account that you KNOW is one of the 3 IRA types entered but the box is not checked, request a revised 1099R. And if you want to proceed with your tax return right away, indicate that the box is checked so your return will be correct. Having the code 4 shown should also eliminate any possible consequences of a penalty if the box is unchecked, but there could be other problems, particularly if there is basis in the IRA from non deductible contributions.

 

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