How to Prove Funds Are Inheritance to the IRS

Money or property received from an inheritance is typically not reported to the Internal Revenue Service, but a large inheritance might raise a red flag in some cases. When the IRS suspects that your financial documents do not match the claims made on your taxes, it might impose an audit. When you are being audited, you should receive a letter, or correspondence audit, and an Information Document Request from the IRS requesting additional information. If you received an inheritance during the tax year in question, the IRS might require you to prove the origin of the funds.

Step 1

Gather any documents that prove the benefactor passed and left you the inheritance. These documents can include the will, death certificate, transfer of ownership forms and letters from the estate executor or probate court.

Step 2

Contact your bank or financial institution and request copies of deposited inheritance check or authorization of the direct deposit. If you received the inheritance in the form of cash, request a copy of the bank statement that reflects the deposit.

Step 3

Make copies of each document and verify that the value of each transaction matches the total inherited amount.

Step 4

Submit the documents to the IRS in the manner requested in the correspondence audit. If you are required to mail the proof, send the documents certified mail.

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About the Author

Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.

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