60 Day Indirect Rollover / Distribution 12/21/13 /Rollover 1/15/14

Submitted by Ina Cohen on Sat, 2015-11-14 21:16

Received distribution In December 2013. Deposited in Rollover Account early January 2014 (well within 60 days)

IRS insists on my reporting the 2013 money as taxable income in 2013. I am confused as I was led to believe that this was a 60 Day Tax Free Transaction.

Any help appreciated.



Submitted by Alan - IRA critic on Sat, 2015-11-14 23:42

Did you properly report it as a rollover on your 2013 tax return, line 15a and 15b of Form 1040?

Submitted by Ina Cohen on Sun, 2015-11-15 00:24

Yes, It was reported on line 15A in total with the net taxable amount (sum I did not rollover) shown in 15BThanks!

Submitted by Alan - IRA critic on Sun, 2015-11-15 00:53

The IRS is not recognizing your return showing just the portion you kept as taxable on 15b?

Submitted by Ina Cohen on Sun, 2015-11-15 01:32

Apparantly not. They are looking at the 2013 1099 and telling me that a matching 5498 does not exist for 2013. They have been sent the 2014 5498 but claim income must be reported in year recieved and give no guidance as to the 5498 dated early 2014.  —Thanksagain!

Submitted by David Mertz on Sun, 2015-11-15 12:25

  • It sounds like the IRS examiner is mishandling this.  You didn’t explicitly say, but since you said the gross distribution amount appears on Form 1040 line 15a, the distribution is apparently from an IRA.  As long as the amount on line 15b includes none of this distribution and the word ROLLOVER appears next to the line, you satisfied the tax-return reporting requirements.  (If the distribution was instead from a qualified retirement plan, it should have appeared on lines 16a and 16b, not 15a and 15b.  The IRS will treat such incorrect reporting as not indicating that the distribution rolled over.)
  • If you mailed your 2013 tax return, it’s possible that the data transcriber missed the “ROLLOVER” indication.  You should obtain a transcript of your 2013 tax return to verify that your tax return was transcribed correctly.
  • Because the rollover was completed in 2014, it’s the 2014 Form 5498 (not a 2013 Form 5498) that should show the rollover in box 2.  If your 2014 Form 5498 correctly shows this and the examiner disputes this as proper evidence of completing the rollover, you’ll need to escalate the problem to the examiner’s superior since the examiner is wrong.
  • Section 4.19.3.7.10.4 of the Internal Revenue Manual appears to provide the instructions to the examiner for examining the reporting of a rollover.  The instructions refer to “a” Form 5498 showing the amount rolled over; it does not appear to say (and should not say) that the Form 5498 must be the same year as the year of the tax return and that it cannot be a Form 5498 for the following year.  https://www.irs.gov/irm/part4/irm_04-019-003r-cont01.html (partially redacted)
  • You may need to follow up with account statements showing the actual date of the distribution and the date of the rollover contribution as proof of properly completing the rollover.

Submitted by Ina Cohen on Sun, 2015-11-15 16:08

Thank you for your time and expertise. I now have sufficient data to respond to the IRS letters/

Submitted by Alan - IRA critic on Sun, 2015-11-15 17:49

I agree – it sounds like the entire issue has resulted from the examiner not understanding that the 5498 reflects the year of the rollover contribution. DIstributions late in the year will therefore frequently have no same year 5498 to match up to the 1099R. I would point up to the IRS the date of the distribution, and the date of the partial rollover and include the statement copies that DMx outlined.

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