Important Reminders

Combat zone. Special rules apply if a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone. A qualified hazardous duty area is treated as a combat zone. See Publication 3, Armed Forces' Tax Guide.

Education IRA. Generally, the balance in an education individual retirement account (education IRA) must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. The treatment of the education IRA at the death of an individual under age 30 depends on who acquires the interest in the account. If the decedent's spouse or other family member is the designated beneficiary, the education IRA becomes that person's education IRA. If another person acquires the interest, that person generally must include in gross income the earnings portion of the distribution. If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent.

For more information on education IRAs, see Publication 590, Individual Retirement Arrangements (IRAs) (Including Roth IRAs and Education IRAs).

Roth IRA. If a Roth IRA owner withdrew an amount from a traditional IRA in 1998 and converted it to the Roth IRA, any amount the owner had to include in income as a result of the withdrawal was included ratably over the 4-year period beginning with 1998, unless the owner elected to report the full amount in 1998. If the owner dies during that 4-year period, any amount not previously reported must be included on the decedent's final return unless the owner's surviving spouse receives the entire interest in all the owner's Roth IRAs and chooses to continue reporting it ratably. For more information, see Roth IRA under Final Return for Decedent.

Medical savings accounts. The treatment of a medical savings account (MSA), including a Medicare+Choice MSA, at the death of the account holder depends on who acquires the interest in the account. If the decedent's spouse is the designated beneficiary of the account, the account becomes the spouse's MSA. If another beneficiary (including a spouse that is not the designated beneficiary) acquires the interest, that person generally must include in gross income the fair market value of the assets in the account. If the decedent's estate acquires the interest, the fair market value of the assets in the account is included on the final income tax return of the decedent.

Consistent treatment of estate and trust items. Beneficiaries must generally treat estate items the same way on their individual returns as they are treated on the estate's return.

Individual taxpayer identification number (ITIN). The IRS will issue an ITIN to a nonresident or resident alien who does not have and is not eligible to get a social security number (SSN). To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. It usually takes 30 days to get it.

An ITIN is for tax use only. It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U.S. law.

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