1099R & 5498
I borrowed money from both IRA & ROTH IRA accounts in August 2009 and returned the full amount of money back to both of my existing accounts 2 weeks later.
It’s considered 60 days rollover and I was told it’s not taxable & no penalty or interest will be imposed on me if money was returned within 60 days.
I just received 1099R showing distribution, but will not received 5498 until end of May 2010, then I am required to report 1099R without 5498 by April 2010. In this case, all borrowed money will become taxable ? since IRS only see the distribution reported, but no contribution reported before tax return due date.
Turbo Tax will calculate my tax plus interest plus penalty based on the money I borrowed in 2009 after I fill out 1099R information? How do I go about this?
1099R did not show the date of distribution, how does IRS determine whether I pay back in 60 days and in the same year? Am I also required to explain the reason of borrowing this money on tax return?
Permalink Submitted by Anonymous (not verified) on Mon, 2010-01-25 01:32
Don’t worry:
The IRS is fully aware of the delay of the 5498 and will make sure it matches the 1099-R in June 2010 (they probably have some computer program to check). You have to tell TurboTax that you rolled the money back. The program will not tax and penalize you, if entered that way.
The 60-day accounting is something the IRS actually trusts you to have done in a timely manner. If ever audited, you will need to show trade dates. And yes, many people probably take their chances and get away with invalid rollovers – their fault, if they get caught.
No explanation is required on the reason you borrowed the money. TT may fill in “rollover” on the line in the 1040 (15a&b).
pmk
Permalink Submitted by Alan Spross on Mon, 2010-01-25 01:43
If you completed the two rollovers within 60 days, just report the rollovers on Form 1040 according to instructions. The IRS does not need to have the 5498 for your rollover to be valid. When the 5498 is finally issued, IRS matching will compare it to your tax return. No special explanation need be completed with your filing.
Someone familiar with Turbo tax will have to tell you how to enter your rollover information so that the return eliminates any taxable income for these distributions. Be sure this was your only rollover distribution from each IRA within 12 months or the distributions would not be eligible for rollover. If OK, be sure not to do this again until 12 months passes from the prior distribution dates.
IRA custodians do not report transaction dates as you indicated. Some enforcement of the 60 day rules should be done at the IRA custodian level. If the custodian sees that more than 60 days has elapsed they are not supposed to code the contribution as a rollover or even accept it unless you represent it as a new regular contribution. In that case the distribution would be taxable and subject to penalty.
Permalink Submitted by veno jones on Mon, 2010-01-25 01:54
Thanks much for your reply.
Permalink Submitted by veno jones on Mon, 2010-01-25 02:03
I don’t see 1099R has any code, perhaps on 5498 ? Thanks again for both of your replies.
Permalink Submitted by Alan Spross on Mon, 2010-01-25 02:05
Right. The boxes to designate a contribution as either a rollover or a regular contribution is on the 5498. 1099R forms only report distributions.
Permalink Submitted by Anonymous (not verified) on Mon, 2010-01-25 02:54
Actually if you mean the 1099-R, it should have code 1*(Rollover IRA) and code J* (Roth IRA), because the custodian does not know your intentions and must code them premature, no exception. But that is irrelevent, because you rolled them over within 60 days and report that to the IRS.
*I assume you are under 59 1/2.
pmk
Permalink Submitted by veno jones on Mon, 2010-01-25 04:38
Yes, now I do see code 1 & J on two separate 1099R, good that you explain, Thanks.