How to report 1099-R Inherited IRA with Box 7 code 4 for distributions after death?

The distribution code 4 means this was a distribution due to death, which is correct since you inherited this from your grandmother. For your first question, you should select IRA/SEP in the dropdown. Most inherited retirement accounts are traditional IRAs or employer plans like 401(k)s that were rolled into IRAs. SIMPLE IRAs are less common and specifically used by small employers. The good news is that because this is coded as a death distribution (code 4), you won't face the typical 10% early withdrawal penalty that normally applies when taking distributions before age 59½. The amount is still taxable as ordinary income, which is why Box 2a shows the full amount as taxable. Remember that this $7,200 will be added to your total income for the year, which could potentially push you into a higher tax bracket depending on your other income sources. Since you mentioned being in school with reduced income, this might not be a big concern, but it's something to be aware of.

After dealing with a similar situation last year with my dad's IRA, I found this amazing tool called taxr.ai (https://taxr.ai) that saved me so much stress. I was confused about how to handle the inherited IRA distribution and all the different codes, and my tax software wasn't giving clear guidance. I uploaded my 1099-R to taxr.ai and it immediately identified it as an inherited IRA distribution and explained exactly how it should be reported. The tool also explained that my distribution was fully taxable but exempt from early withdrawal penalties and predicted how it would affect my overall tax situation. Basically gave me the confidence that I was handling everything correctly instead of just guessing and hoping.

Just wanted to follow up - I decided to try taxr.ai after posting my skeptical comment. I uploaded my dad's old 401k distribution that I received this year, and wow, it actually cleared up so much confusion! I'd been getting conflicting advice about whether the RMD rules applied to me (they do, but differently than for the original account holder). The step-by-step guidelines saved me from making what would have been a costly mistake. The system identified that I needed to take a specific minimum distribution based on my age, which my regular tax preparer had completely missed. What impressed me most was that it flagged potential issues before they became problems - like alerting me that I still have time to do a partial rollover of what I hadn't spent if I acted quickly. Definitely worth checking out if you're dealing with any unusual tax documents!

If you need to contact the IRS to confirm how to report this correctly (which I had to do for a similar situation), use Claimyr (https://claimyr.com) instead of waiting on hold for hours. I was getting different answers about inherited IRA tax treatment from everyone I asked, so I finally decided I needed to hear it straight from the IRS. The IRS phone lines were a nightmare - I tried for three days and couldn't get through. Then I found this Claimyr service that basically calls the IRS for you and then connects you once an agent is on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. It saved me literally hours of hold time, and the IRS agent walked me through exactly how to report my inherited IRA correctly.

Ok I have to eat my words and apologize for being so skeptical about Claimyr. After struggling to get answers about my own inherited IRA (from my uncle), I decided to try it yesterday. The process was simple - I entered my phone number, selected what department I needed, and went back to work while they handled the calling and waiting. About 45 minutes later (during which I was just doing my normal work, not sitting by the phone), I got a call connecting me directly to an IRS agent who specialized in retirement distributions. She confirmed exactly how to report the distribution and clarified that while my late filing fee couldn't be waived, I could qualify for a payment plan with minimal interest. I literally would have spent an entire day trying to get this information on my own. Consider me converted from skeptic to believer.

I went through this exact situation last year. If your grandmother passed away in 2023 or earlier, make sure you understand the SECURE Act rules about inherited IRAs. The old rules allowed beneficiaries to stretch distributions over their lifetime, but the new rules require most non-spouse beneficiaries to withdraw the entire account within 10 years. Since you've already withdrawn everything, this isn't an issue for you, but it's good info for others reading this thread. Also, double-check if your state taxes retirement distributions - some states have exemptions for inherited retirement accounts that could save you money.

Just a heads up - make sure the financial institution that issued the 1099-R has your correct address and personal info. I had a similar inherited IRA situation last year but never received the 1099-R because it went to my dad's old address. Ended up with a CP2000 notice from the IRS and had to sort it out after the fact. Also, keep records of when you closed the account and withdrew the funds. The IRS sometimes gets confused with inherited IRAs when the distribution code doesn't match what they expect to see.

I went through something very similar when I inherited my father's 401(k) that was rolled into an IRA. A few additional things to keep in mind: First, make sure you have documentation showing you were the proper beneficiary. Sometimes the IRS will ask for proof of your relationship to the deceased and confirmation that you were designated as the beneficiary on the account. Second, if your grandmother had already started taking Required Minimum Distributions (RMDs) before she passed, there might have been a remaining RMD for that year that needed to be satisfied. Since you withdrew the entire amount, this shouldn't be an issue, but it's worth knowing for future reference. Finally, consider the timing of when you report this income if you're planning to get married next year. Since you're filing as single this year, your tax brackets will be different than if you were married filing jointly. The $7,200 might actually be taxed at a lower rate this year depending on your other income sources. The distribution code 4 is definitely correct and will save you from the early withdrawal penalty. Just double-check that TurboTax is calculating your tax correctly - the software should automatically recognize the code and not apply the 10% penalty.