RMD waived late, returned distribution, but after Jan. 1
The 2009 RMD from one account was distributed before I contacted the institution saying I wanted to waive the 2009 RMD. They said to cash the check, then write a new check for exactly the amount of the distribution and send within 60 days. I did that, but since it was near the end of the year the check was received and re-deposited at the institution after Jan. 1, 2010.
So, the 1099-R shows a distribution. No taxes were withheld.
How do I handle this on the tax return? Do I file by mail (rather than e-file) and include a letter of explanation and a January statement from the institution showing the deposit was made in January but within the 60-day window? I don’t want to pay taxes on the distribution (which normally would be fully taxable) but the 1099-R shows they paid out a distribution in 2009. (Which, technically, they did, and on 12/31/09 they had not yet received the returned funds, so it is understandable that they consider it a distribution.)
thank you
Permalink Submitted by Alan Spross on Tue, 2010-03-09 23:09
The main point is whether they received the replacement check within 60 days of the distribution you intended to roll back into the plan, and also that they coded it as a rollover contribution rather than a new regular contribution. If the 60 days includes part of 2010, that does not matter as long as you are within the 60 days.
If that all checks out, just report this as a rollover on line 15a and 15b of your 1040, and it will not be taxable. If this was NOT an IRA, but an employer plan, it goes on 16 instead of 15. Tax programs will not have any problem with a simple rollover, and can be e filed.
Check your activity statements to be sure they coded it as a rollover contribution, and if not get ahold of them ASAP to see if that can be corrected.
Permalink Submitted by ray perez on Wed, 2010-03-10 04:07
i have a statement showing the deposit. Reading IRS rules it appears the 60 day window starts the day after you receive the distribution (not the day the institution cut the distribution check). I’m not sure on the other end when the 60 day window ends. I haven’t found IRS info on that, yet. I don’t know if it’s when the institution receives the returned funds or when it is deposited into the account. (It could sit on someone’s desk for a week before being deposited)
I do believe I’m within the 60 days, though it depends on the actual days the IRS counts from and up to.
My concern in just entering the rollover on line 16 (it’s an annuity not an IRA) is that the 1099-R which the IRS has a copy of shows a normal distribution (Code 7), not a rollover, since the funds had not been returned by 12/31. The 1099-R has to match what I input in tax software, so I don’t know how I can call it a rollover when the 1099-R calls it a normal distribution. That’s why I thought a letter of explanation with a mailed return might be necessary. How do you deal with a 1099-R with code 7 and still try to show it as a rollover at the same time?
Permalink Submitted by Alan Spross on Wed, 2010-03-10 04:51
I am not aware of a definition of the end of the 60 day period. I would use the day you think your rollover contribution landed in their mailroom.
As for the 1099R, all distributions to those over 59.5 will get a 1099R with a Code 7. The 1099R is issued without regard to rollovers since the issuer has no idea if you rolled over the amount or not unless you rolled it back to the same plan. As long as the plan accepted your contribution, I would not worry about it. Enforcement of 60 day rollover deadlines is basically is the hands of the custodians and if they know the 60 days has been breached, they are not supposed to accept the rollover contribution. The year does not matter either. If the 60 days runs into the next calendar year, it is still a valid rollover and you would report it as such on lines 16a and 16b of Form 1040. The gross amount of the distribution goes on 16a and -0- goes on 16b with “Rollover” entered next to 16b. Software programs will take care of this easily and there is no need for any special explanatory statement.
Actually, if Congress had not passed the provision so late in the year (signed 12/23/08), the plan systems could have been programmed to prevent the issue of these RMDs in the first place.