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Retirement CPA discusses the IRA Required Minimum Distribution rule for a Deceased Tax Payer

A retirement CPA often doubles as the Estate CPA. And we know the IRS expects your compliance, even from the grave. It’s unfortunate that the Family has to deal with tax and legal matters while in mourning.

This post focuses on the IRS Required Minimal Distribution for IRA(s). IRA contributions bypass taxation when made. But get taxed when distributed. And the IRS doesn’t want to wait forever to collect that tax. So, at age 70.5 (go figure) they demand a minimal distribution. There’s a nice complex calculation involved.  The Required Minimal Distribution can’t be rolled over. A good retirement CPA can sometimes help with strategies to make the best of a bad tax situation.

“The IRS demands an IRA Required Minimal Distribution be paid, even if you die during the tax year.” 
– Gary Bode, retirement CPA

Generally an IRA Required Minimal Distribution isn’t complete in the year of death. Why? It could be paid as monthly installments, or paid in full at the end of the tax year. It is seldom distributed on January 1st, because most folks understand the tax-free growth that occurs with an IRA.

In the year of death, the IRS wants the rest of the required minimal distribution to be paid to the deceased’s heir in the year of death. But there’s some wiggle room. If the heir isn’t told about this rule, they have to take it as soon as possible, which might mean in the next tax year.

Here’s the three ways the remainder of a required minimal distribution play out.

  • It’s paid to the deceased. Then it’s included in the final Form 1040.
  • It’s paid to the deceased’s Estate. Now it’s on the first Form 1041 the estate CPA files.
  • It’s paid to an heir. Talk to your CPA about how to handle this.

Tax obligations don’t end with death. I’m an estate and retirement CPA sensitive to the Family’s grief. Our CPA firm has a virtual office, so we serve you almost regardless on where you live. If you don’t have a CPA, or just like what you read, consider calling for a free phone consult: (910) 399-2705.

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