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March 11, 2023
Question

What happens if I forget to include a 1099 for a non-taxable inheritance?

  • March 11, 2023
  • 2 replies
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My inheritance consisted of my portion of the sale of my father's condo.

2 replies

Employee
March 11, 2023

If you were issued a form for income the IRS will tax you on it since they have no way to tell it wasn’t taxable. 

DMarkM1
March 11, 2023

Generally, if you have forgotten to include income on your return you will need to amend your return to add/include it.  

 

You mention "non-taxable inheritance" and say it is "your portion of the sale of your father's condo."  Not all parts of an inheritance are non-taxable.  One example is the sale of a property.  Any gain on the sale of the property is taxable.  However the gain generally is calculated as your portion of the sales proceeds minus your portion of the fair market value on the date of death of your father.  

 

You likely received a form 1099S showing the sales proceeds.  As bsch4477 mentions the IRS also received that form but does not know the cost basis (Fair market value on the date of death) so will treat all the proceeds as taxable. 

 

You will likely get a letter from the IRS indicating the missing income.  They will give instructions on how to proceed.  They also may not find that error until later after initially processing and issuing a refund. 

 

In the meantime using the "Amend" option in TurboTax in the "Wages and Income" section use the "Investment" area to enter the 2nd home sale.  You will need a fair market value on the date of death for the calculations.  The real estate broker should be able to assist with this.  It is usually an appraisal report.  

 

If after entering the data your tax does not increase or refund decrease then do not file the amendment but wait for the IRS to notify you and then you can submit what they ask for.   

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