5498
I have a client/business associate who had funds rolled over from his previous 401K plan to a brokerage IRA. He then had the funds sent to his new 401K plan.
No 5498 was generated. Who is responsible for that form being issued or is it the individual’s responsibility to report which he didn’t do, thus an IRS notice was generated to him for unpaid taxes.
Permalink Submitted by Denise Appleby on Thu, 2012-05-10 17:45
[quote=”[email protected]“]I have a client/business associate who had funds rolled over from his previous 401K plan to a brokerage IRA. He then had the funds sent to his new 401K plan.
No 5498 was generated. Who is responsible for that form being issued or is it the individual’s responsibility to report which he didn’t do, thus an IRS notice was generated to him for unpaid taxes.[/quote]
Form 5498 is not issued for qualified plans (including 401(k) plans).
A 5498 must be issued for the IRA. If the client did not receive a 5498 for the rollover to the IRA, the custodian should be contacted for a copy.
The instructions for Line 15 and 15a (for distributions from IRAs- line 16 for distributions from qualified plans) on IRS Form 1040 explains how the reporting should be done on the tax return. Line number is different for other versions of Form 1040
I hope this helps
Permalink Submitted by Alan Spross on Thu, 2012-05-10 22:46
Because the IRS does not see many IRA to QRP rollovers, and because there is no 5498 to match up with the 1099R for these rollovers, the IRS is very likely to send an inquiry. The 1040 instructions indicate to include an explanatory statement detailing the IRA to QRP transfer, but then again the IRS is prone to overlooking these statements. Therefore, even if you made such a statement you may still get an IRS inquiry, but if the statement was not included you are almost sure to get one. The “G” code on the 1099R does not appear as effective as it should be to prevent the inquiries. There may be two reasons for that:
1) The IRS matching program does not recognize distribution codes (most likely)
2) A few banks will actually cash a direct rollover check made out FBO employee and they should not be doing that.
Once you get the inquiry, your response should include a dated copy of the 401k plan statement showing receipt of the rollover contribution that will match up with the amount shown on the 1099R.