1099 for IRA to Inherited IRA?

Submitted by Jason Frank on Fri, 2019-03-29 13:04

A client with a traditional IRA passed away in 2018 and the funds were directly transferred into an inherited IRA for his wife at the same custodian. The custodian issued and 1099 for the distribution from the husband’s IRA.

Her accountant says that a 1099 should not have been issued since the funds went directly from his IRA to an inherited IRA. The custodian says that since the funds left the IRA they have to issue a 1099, but she will receive a 5498 to show that the money went into an IRA.

I “think” the accountant is correct, but would greatly appreciate a second opinion. If so, I will go back to the custodian to fight for a corrected 1099. Thank you in advance!!



Submitted by Alan - IRA critic on Fri, 2019-03-29 15:36

  • Yes, the accountant is correct. Funds “leaving the IRA” is not a factor or all transfers would be reportable. As long as the money was not distributed to the beneficiary, but was moved directly to the inherited IRA, there is no distribution and should be no 1099R or 5498 issued.  What if the wife had already used up her one permitted rollover in the last 12 months?  The 1099R would force her to prove to the IRS that this was not actually a distribution, which she could probably document, but it would be a hassle.
  • If she changes her mind and wants to do a spousal rollover, she should be sure to first notify the custodian that she is electing to assume ownership of the inherited IRA. This will result in another non reportable transfer because the custodian will probably move the balance to a new account number. She can then move that to a new custodian by doing another direct transfer if she wants to. Again, all of this is done without receiving a distribution and there should be no 1099R or 5498 issued.


Submitted by Jason Frank on Fri, 2019-03-29 15:42

Thank you for your help!



Add new comment

Log in or register to post comments