Best Rollover
Two related questions:
1. If a taxpayer receives a full surrender distribution from a qualified annuity and wants to use their one a year rollover within the allotted 60 days, what is the best way to deposit the distribution to their IRA account?
I’ve heard some say to have the distribution check deposited in the taxpayers own personal bank account and then cut a check from this bank account to the receiving IRA custodian. I’ve always thought to endorse the distribution check over to the receiving IRA custodian.
2. If the receiving IRA custodian codes the rollover incorrectly (custodian to custodian transfer) and doesn’t produce a form 5498, what can the taxpayer provide the IRS for his 2014 tax return? The custodian claims a correction is being made, but a form 5498 will not be produced until May, 2015.
Thank you in advance for your thoughts.
Permalink Submitted by Jose Morales on Wed, 2015-03-04 19:06
It does not matter if you endorse the check withdrawn from the first IRA to deposit in the second IRA or if you deposit the funds into a checking account then write a personal check for deposit to the second IRA. Both are perfectly acceptable. A form 5498 would not be produced showing the rollover until May, even if it was coded as a rollover correctly. If they did make an error in coding the transaction they have plenty of time to fix the coding on their system so that the original data that is transmitted to the IRS in May shows a rollover and the 5498 mailed to the individual also shows the rollover. You don’t have to provide the IRS anything for a properly coded rollover, as they do not receive rollover information until after the tax filing due date anyway. You just need to be sure to complete your tax forms correctly, listing the distribution from the 1st IRA and properly reporting the amount of that distribution that is taxable ($0 if all of the funds were rolled over appropriately). If filing by paper return, many will write “rollover” next to the box that us used to report the taxable portion of a distribution.