inherited a 403B/qualified plan from the TSP question?

Forum|Forum|2 years ago
March 21, 2024
1 reply
0 views

my son's and I inherited funds that had a RMD due to the age of the accounts owner. We each took the RMD amount shown by TSP during the transfer of ownership of the account. The small RMD is being taxed as I would expect, but the larger amount is being shown as non-taxable income on TT? the rolled over balance was placed in an inherited IRA. My son had a 1099-NEC job last summer paying 960.00 + the 550 RMD is yielding a federal tax due of 97.00. This is not passing the smell test!

What did I do wrong?

Best answer by dmertz

The rollovers of portions of the TSP to inherited IRAs is not a taxable transaction. This money will be taxed when distributed from the inherited IRAs.

A balance due of $97 sounds exactly right, assuming that there was $55 of tax withholding on the TSP RMD distribution. In this case the standard deduction for your son as a dependent is earned income plus $400. The result is taxable income of $150. Tax from the tax table on $150 is $16. Add to that $136 of self-employment tax, subtract the $55 of tax withholding and you get a balance due of $97.

dmertzAnswer

Employee

The rollovers of portions of the TSP to inherited IRAs is not a taxable transaction. This money will be taxed when distributed from the inherited IRAs.