Required Mandatory Distribution (RMD) tax reporting/forms

Submitted by Diane Connolly on Sun, 2017-01-22 00:34

I have a 401K – IRA . I took my required distribution last year when I became 70 1/2. The account in maintained by a institution bank. I had the distribution deposited into my checking at the same institution.

I did not receive a confirmation that I made the required “pull” from the retirement account, but, did in fact complete paperwork when the distribution was taken.

I understand that the IRS form 8606 needs to be completed. I have a further problem where after-tax monies are in the account in error but have documentation that the after-tax funds in the account including a 1099 when the
error occurred.

Question: Is the financial institution responsible in reporting my distribution that I took last October 2016 to the IRS besides my reporting in on the 8606?

Question: The 401k – IRA is in a savings account and has earned interest in 2016 – I believe that I should be receiving a 1099 because I have to report the interest, is that correct? But then I thought that the interest in NOT taxable until I withdraw it?

Question: The bank is supposed to provide me with a tax form / document that the distribution was taken similar to a 1099, correct? Is not, what form should I have received, if any?

Thanks…..

Question:



Submitted by Alan - IRA critic on Sun, 2017-01-22 02:02

  • Yes, you should be receiving a 1099R for your distribution before the end of this month. There is no current taxes on interest or investment gains, only when a distribution is made out of the retirement account. It is not clear whether you have a 401k or an IRA account or both. If you have both, an RMD must be taken from each account and there would be a 1099R for each.
  • The next issue is whether you have basis in these accounts. For a 401k, the plan tracks your basis and the 1099R will indicate the taxable amount. For an IRA, you must track your basis using Form 8606. The 1099R for an IRA will show the entire distribution as taxable because the IRA custodian does not know your basis. If you have a basis the 8606 will reduce your taxable amount on a pro rate basis. I do not understand your statement that after tax contributions are in the account in error. What kind of error? A 1099R only reports distributions from an account, not contributions.
  • Any account for which you take a distribution will issue a 1099R. There are no other forms. This 1099R does not indicate whether the distribution is an RMD or not. You report RMD distributions on Form 1040 just like any other retirement distributions that are not RMDs. A 401k distribution goes on line 16 and an IRA distribution goes on line 15.
  • If you do not have your 1099R by around Feb 7th, call the respective custodian and ask about it.

Submitted by Diane Connolly on Sun, 2017-01-22 22:49

Alan –  To clarify -when I moved my 401K from trustee to trustee a few years ago there was after-tax contributions in the account.  The transferring party did not back out the after-tax contributions and the receiving could not/would not separate them out when the trustee to trusteetook place.  I did receive a 1099R at that time which indicated the after-tax money.  I understand about the reporting on the 8606 and how that after-tax monies will be prorated when completed for my RMD I did in 2016.  When I moved all my IRAs and 401K it was combined into one account. When the brokerage company did that transfer to transfer they suggested combining all the account (401K & IRAs) to simplify reporting and taking distributions.  Am I in “trouble” here……BTW the 401k was actually awarded to me in a divorce settlement which was 1/2 of the ex-husband’s account because of the many years of marriage (37)…..  

Submitted by Alan - IRA critic on Sun, 2017-01-22 22:57

This is not a problem. Once a 401k is rolled to an IRA, it is an IRA in all respects and there is no need to maintain more than one IRA account. As long as you report distributions correctly on Form 8606, part of your distribution will be non taxable. SInce the after tax money came from the 401k (I assume after 2001) you show the basis on line 2 of the 8606 when you first report it since it did not come from non deductible IRA contributions. 

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