IRA and TSP
I worked for Federal gov. and borrowed from TSP account last year and is paying back loan bi-weekly, do I need to report it in tax return? Will my employer sent me any tax document? I heard borrow from your own TSP is not taxable.
I also borrowed from traditional IRA & redeposited all money back to the same existing IRA account within 60 days, but according to tax software, the rollover should be put money back to another IRA account, there’s no option to check “deposit back to the same IRA account.”
Does it mean IRS regards money in and out of the same IRA account is not considered a rollover and may come after me for tax & penalty?
Thanks in advance for your help.
Permalink Submitted by Alan Spross on Sat, 2010-02-13 16:38
You should not have any problems in either case.
For the TSP loan, there is no taxable event unless you failed to make the payments and then you would get a 1099R for a deemed distribution. Since you are current and I assume you did not receive a 1099R, then there is nothing to report on your tax return.
For the IRA rollover, you can roll the funds back to the same or a different IRA, so the tax software did not describe all the options. Just enter that you rolled it over to a different IRA then and there will be no tax due. This should show on line 15 of Form 1040 with “Rollover” entered next to 15b. There should not be a figure in 15b unless it is -0-.
But be aware that you can only do one of these rollovers once per 12 month period, so you cannot use this IRA again for a temporary distribution and rollover until 12 months passes from the date of the prior distribution. If you have another IRA account, you could rollover a distribution from that account as the limit applies per account. If you want to move funds to another IRA custodian, use a direct trustee transfer since there is no limit on direct transfers, just rollovers where you actually received the funds yourself.
Permalink Submitted by Leon Smith on Sat, 2010-02-13 18:07
Thank you very much for the reply.