Indirect Rollover Question
A client of ours took some money out of their Traditional IRA last year and decided to reinvest it within the 60 rollover time frame. Their 1099 shows the withdrawal. but it doesn’t show that it was reinvested. The investment company said that it would be up to the tax preparer to make this adjustment. However the tax preparer is unfamiliar with this. What would be the correct way to do that?
Permalink Submitted by Alan - IRA critic on Tue, 2022-03-29 22:37
Client simply needs to report a rollover on line 4a and 4b of Form 1040 and enter “rollover” on the line next to 4b. 4b would be 0, so no taxable income will be reported. Note that client can only do this one time over a 12 month period between IRAs of the same type. Therefore, if client rolled over a prior distribution taken less than 1 year prior to the more recent distribution, they were not eligible to roll the more recent distribution back to the IRA. The receiving custodian of the rollover will report it on Form 5498, so the IRS will know what occurred. It is very odd that a trained preparer would not know this.