Rollover Excess – revisited
I posted this topic already a couple months back, but now I’m trying to make sense out of my excess situation in 2008 which requires me to amend my return:
I rolled over (401K to Rollover IRA) $90.75 of an employer match that I was not eligible for in 2008. In 2009, I was informed of it and I promptly removed the amount with [u]losses[/u] by 10/15/2009 (amount=$88.96). My 2008 1099R from the rollover was corrected ie. $90.75 less.
Does this $88.96 represent addtional income in 2008? Obviously, I have a 2009 1099R showing the amount with code 1P. I could go either way when I enter the amount in TurboTax:
if yes – it adds it to my 2008 income and assesses a $9 penalty.
if no – there is literally no effect on my 2008 taxes
I am inclined to go “yes” just to be on the safe side and pay a small amount.
Any opinions/guidance would be helpful.
Thanks.
pmk
Permalink Submitted by Alan Spross on Thu, 2010-01-21 23:08
I did not try to pull up the prior discussion, so don’t know that this is consistent with prior thoughts, but….
This appears to be a corrective “distribution due to incorrect rollover information”, per P 50 of the Pub 590 attached.
http://www.irs.gov/pub/irs-pdf/p590.pdf
Also, I think that you would have had to return either the 90.75 or the 88.96 to the plan, so this should not be income to you and you never deducted it. From there I come up with no additional taxable income for 2008. But you still have an amendment to show the reduced amount of the direct rollover on line 16.
Does that make sense?
Permalink Submitted by Anonymous (not verified) on Thu, 2010-01-21 23:19
I agree with you. I did pay back the money to the plan, so it is just showing the corrected 1099R and explaining the 2009 1099R.
The only reason I am so cautious is that I do not want to get contacted by the IRS in 2 years to revisit this again. The way I see it, I would pay $20 (impact on federal and state) to be on the safe side. Actually, I am getting a refund due to this amendment, because I forgot a deduction, so I technically gained out of this. I don’t know, if that makes sense…..
Thanks for reviewing again.
pmk
Permalink Submitted by Alan Spross on Thu, 2010-01-21 23:34
The piece of mind of may be worth it, even though I think the chances of the IRS returning your money as an overpayment is not very good because they are not likely to understand the details of your situation even if you tried to explain it in a statement.
Permalink Submitted by Anonymous (not verified) on Fri, 2010-01-22 01:45
Completely agree. I recall hearing some horror stories from clients dealing with the IRS about complex IRA situations. I rather pay a “tax” to avoid all that.
Have a good evening.
pmk