Firm Seeks Guidance on Post-Death Roth IRA Distributions

October 14, 2020

Carol Weiser
Benefits Tax Counsel
Department of the Treasury, Carol.Weiser@treasury.gov

Stephen B. Tackney
Deputy Associate Chief Counsel
Office of Chief Counsel
Internal Revenue Service, stephen.b.tachney@irscounsel.treas.gov

Request for guidance regarding disclosure and reporting information when Roth IRA post death distributions are paid to a trust

Dear Ms. Weiser and Mr. Tackney:

I respectfully request that Treasury consider granting guidance regarding disclosure and reporting information when post-death distributions are made from the decedent's Roth IRA account to a trust that is the beneficiary of the owner's Roth IRA account(s).

Many taxpayers have Roth IRA accounts. Roth IRAs are often recommended by advisors to clients for tax planning, estate planning and asset protection purposes. In that connection the Roth IRA owner may establish a trust as the beneficiary of his/her Roth IRA account.

The question is where on the Form 1041 do you indicate whether or not a post-death Roth IRA distribution that has been received by a trust is a qualified or nonqualified distribution?

It should be noted that Form 1040 at line 4a would indicate the amount of a gross distribution from a Roth IRA and Form 1040 at 4b would indicate the amount of a taxable distribution, if any, from a Roth IRA if the distribution is a nonqualified distribution. The instructions for Form 1040 provide detailed information regarding Roth IRA distributions that are made to the Roth IRA owner during the owner's lifetime or made to the individual beneficiary of an inherited Roth IRA.

In my opinion detailed Roth IRA instructions should be provided for in the instructions for Form 1041 when a trust or an estate is the recipient of a post-death Roth IRA distribution.

It is true that the instructions for Form 1041 contains some information regarding distributions that are made from IRAs to a fiduciary. It states that the income portion of a total distribution must be reported on Form 1041, line 8, other income. However, the instructions do not cover any details regarding post-death Roth IRA distributions.

This may trigger problems with the IRS for the trustee if the trust return does not provide sufficient information that is needed by the IRS under the IRS computer document matching program regarding post-death Roth IRA distributions that are received by the trust. For this reason I suggest that the instructions on Form 1041 be expanded to cover post-death Roth IRA distributions that are made to a fiduciary. Perhaps it should be shown as a detailed attachment to line 8 of Form 1041 for ease of tax administration. I currently suggest this approach to trustees who receive post-death Roth IRA distributions.

If you have any questions, please feel free to contact me at 516-222-0422 or email me at info.goldbergira@gmail.com.

Sincerely yours,

Seymour Goldberg
GOLDBERG & GOLDBERG, P.C.
Melville, NY