On the section about tax deferred pension and retirement savings, it says NOT to include certain codes from the W2. My question is, is there a place the money from those codes is supposed to go? In my case I’m talking about code DD.
Inherited IRA. Have not taken money out so no income to report from that. Does the money in the inherited IRA then get included in the section that asks about value of retirement plans?
Thanks in advance.
Code DD is for the portion of healthcare costs paid by the employer. It’s informational, and it’s not money earned/received by the employee. So it’s not reported on FAFSA anywhere.
An inherited IRA is not your retirement account. It gets reported in investment value. You’ll also have to report distributions, since the IRA will have to be distributed over 10 years. If it’s a spousal inherited IRA, though, it’s considered a qualified retirement account & is not reported on the FAFSA.
OP- when did you inherit the IRA? There are required distributions- but if you are counting on your brokerage firm to let you know ahead of time that a distribution is required, AND that you need to sell some assets to generate enough cash to make the distribution- you are in for a surprise.
I won’t name names… but one of the biggest retail brokerage firms has consistently messed this up for one of my siblings. Schedule yourself half an hour to read up on the requirements AND to check that the distributions have been made (on time, and for the proper amount). Well worth the time!
Thank you!
For future readers, please be sure to research how inherited IRAs are handled for your specific situation. Today, there are different requirements based on relationship of owner to inheritor (spouse vs non-spouse), and on the date of death of the original owner.
The answers given seem to be specific to the limited information presented in the original post.
(After my parent passed, the lawyer who was handling their estate- with a successor trustee - provided incorrect information about handling of the IRA that was correct for a spouse inheriting, but not a child. Thankfully I had done the research prior.)
Excellent post. And I will reiterate- do NOT assume that the brokerage firm which holds the inherited IRA will handle YOUR withdrawals correctly. You need to take ownership of the withdrawal process (including selling enough assets every year to have enough cash to make the minimum distribution), and then instruct the brokerage firm. They may or may not do it correctly on their own, but the penalties will be levied against YOU, not them, if you don’t take a required distribution. And I think the current penalty is 50% of the required payment- pretty hefty incentive for marking your calendar in advance and making sure you are in compliance!