Unfortunately, once you closed the account and received a full distribution, you lost the ability to treat the sum as an inherited IRA. Even though you have not “cashed the check,” the issuance of a check payable to you constitutes a distribution under the Tax Code. For a non-spouse beneficiary, once that happens, there is no going back. As a result, the value of the check will be included in your gross income for the year of receipt. You will receive a 1099-R from the IRA custodian that should be filed along with your annual return.
While you can’t undo this mistake, you can look towards the future. You may be able to contribute a portion of that money to either a Traditional or Roth IRA. The annual maximum contribution limit for 2017 and 2018 are the same: $5,500 per year plus an additional $1,000 catch-up contribution if you are age 50 or older. Since it is before the tax filing deadline, you may be able to contribute for both 2017 and 2018! However, make sure you meet all the other eligibility rules before you contribute.
For example, let’s say you are age 55 and were eligible to contribute to either account for both years. Since you were above age 50 for 2017 and 2018, you get to use the additional $1,000 catch-up contribution for both years. As a result, you could contribute $13,000 to an IRA today. From that contribution, $6,500 would be attributed to 2017 and the other $6,500 attributed to 2018. If you use a Traditional IRA, you would have to determine whether you could deduct all, or a portion, of each year’s contribution. If you use a Roth IRA, you won’t get to deduct any of the contributions. However, those contributions will grow on a tax-free basis for future use.