IRA partial rollover not done as a direct transfer
Client had a partial distribution sent to her from her insurance company IRA in the form of a check made out to her personally. She endorsed the check and mailed it directly to another insurance company to add to a different annuity IRA. She received a 1099-R from the original IRA insurance company coded as a” normal distribution”. What form will the receiving company issue to the client so she can give her CPA proof the funds ended up in another IRA? Is this form automatically generated by the receiving company? When can she expect this form to be sent to her? Anything else I need to know or her CPA needs to know?
Pat
Permalink Submitted by Alan Spross on Tue, 2010-03-02 02:04
She should have Form 5498 by now from the receiving custodian if the funds were received in 2009. That should have been received by 2/7 or earlier. But without it, a copy of the statement from the insuror showing receipt of funds equal to the 1099R for the distribution should be more than enough to proceed with the return and reporting the rollover on line 15 of Form 1040. Of course, there should be no more than 60 days between the receipt of funds and completion of the rollover. IF there was no 5498 issued, it could be a red flag that the rollover is NOT in an IRA, and that would be a serious problem to check out ASAP.
The other issue is that there is only ONE rollover allowed per IRA account. This means that she cannot have done a rollover in the prior 12 months from or to the old IRA, and it also means that she cannot rollover a distribution from the new annuity IRA for 12 more months.
Permalink Submitted by Jose Morales on Tue, 2010-03-02 21:29
Not every IRA Custodian/Trustee issues a substitute 5498 with the Fair Market Value/Year End Statement. It may not come until May, as the 5498 also reports contributions that may not be made until April 15th. If the client completed an eligible rollover (within 60 days of the distribution, only rollover of the funds within the prior 12 months, and did not include an RMD or 72t) they just need to adjust the taxable amount listed on line 15b of tax form 1040 and write “rollover” next to it if they want to take extra precautions. You do not attach the 5498 to your 1040 when filing your taxes.