indirect rollover
Individuals husband died, she was beneficiary of his 401k. the custodian distributed the funds to her and withheld 20% estimated tax. She came to us and put the amount she received in a TIRA. her CPA is telling her she owes tax on the entire account balance. how does the CPA show on the tax return the amount that was rolled into TIRA?
Permalink Submitted by Alan - IRA critic on Wed, 2021-04-21 15:30
If she rolled the 80% she received to an IRA within 60 days of receipt, only the amount withheld will be taxable. CPA would show 1099R box 1 amount on line 5a of Form 1040, and the withheld amount on 5b. Sounds like CPA does not understand that she did a partial rollover. If she can come up with some or all of the withheld amount within the same 60 days, she could roll that over to add to the portion already rolled over. That would eliminate all taxes. Perhaps she even has time to file for 2020 showing a 100% rollover and get her refund of the 20% which she could use to complete the rollover within 60 days. This all depends on when she received the distribution and when she might receive a tax refund. Obviously, she should have done a direct rollover to avoid these issues.