1099r
I have a client (age 60) who took a distribution from and IRA of $20k. We had 10% withheld for federal taxes. Shortly after the client took out another $20k and had federal taxes withheld. The client ended up not needing the second $20k so we rolled back in $18k within the 60 day rules. We know that the $2k not rolled back in will be considered a distribution. My question or concern is actually this; the 1099r has box 1 Gross of $40k and box 2a Taxable of $40k box 2b “checked” and box 7 Code 7. Shouldn’t box 2a only be $22k (original $20k and $2k not rolled back in)
Please help!!!
Any advise/assistance would be greatly appreciated.
Thanks,
Nick
Permalink Submitted by Alan Spross on Mon, 2009-03-09 15:44
Nick,
The IRA custodian must report the total distribution, but there will also be a 5498 issued to show the 18,000 amount received back by the IRA in the rollover, so the 1099R is correct per IRS instructions. Line 15 on client’s 1040 should show 40,000 on 15a and 22,000 on 15b with “rollover” entered next to 15b. This will result in the tax bill being as expected.
Client should also be warned that he has used up his one rollover per 12 month period from the IRA account, and until that period has expired any transfer to another IRA should be done by direct transfer.
Permalink Submitted by [email protected] on Mon, 2009-03-09 17:53
Alan,
First, Thank you very much for help.
Secondly, My client insist on filing his taxes himself. He uses TurboTax Deluxe and on the software the only way to input information is for box 1of 5498 which is for contributions and obvisouly we didn’t have any of those this year. Are you familiar with this software or do you have suggestions as to how to input the correct info onto TurboTax?
Thanks again,
Nick
Permalink Submitted by Alan Spross on Mon, 2009-03-09 18:20
I don’t use TTax, but this is a very basic issue and he has the Deluxe version, so there is no doubt that it should handle this easily. If there are prompting questions, he needs to find where it asks about rollovers and he can enter the 18,000 rolled over. The 5498 reports rollover contributions in Box 2, not Box 1, so that may be the answer right there. The 5498 is not overdue until June 2nd, so he may not yet have the 2008 5498. If not, he does not need it because he knows he rolled over the 18,000.
Permalink Submitted by Jose Morales on Mon, 2009-03-09 18:59
I use Turbo Tax myself and can tell you that this is unfortunately not all that cut and dry with this application, whether you use the desktop or online version. I had an employer sponsored retirement account from which I completed a direct rollover to an IRA. This was covered in Turbo Tax easily. I also had an IRA distribution which I rolled over to another IRA. This gave me a slight headache on Turbo Tax. Unlike the distribution from the employer sponsored plan, I was not asked if I had rolled over the distribution to an IRA account. There was a section later on in which it was stated that rollovers would be covered but I went through the entire program and it was never covered. I tried going back to the beginning to start over, which made a mess of things, and still no part of the process to cover rollovers.