SEP-IRA rollover to 401-k
I have a schedule C business and opened a 401-k plan a few years ago. I am the only particpant. I had two separate SEP-IRA’s at different security firms from contibutions made years ago. I asked them to transfer my entire balances to my 401-k and they sent me checks for the balances, one in my name and one in my name and the plan’s name. Both checks were immediately deposited into the 401-k plan within days of receipt. The IRS says that since both companies showed the distributions as full distributions with no known exceptions, it is all taxable income. I am under 55 and do not need the money, but now I don’t know if this is a qualified rollover. Any thoughts? Thanks in advance for your help.
Permalink Submitted by Alan - IRA critic on Tue, 2013-03-05 17:41
When IRA assets are rolled into an accepting employer plan, there is no Form 5498 issued by the employer plan that the IRS can match with the 1099R forms issued by the IRA custodian. Therefore, it is particularly important that you include an explanatory statement with your tax return explaining that the distributed funds were rolled over to an employer plan. Even if you report the rollovers correctly on lines 15a and 15b of Form 1040 and include the explanatory statement, and even if the 1099R is coded G, the IRS will frequently require additional documentation. The documentation they would need is a copy of your plan statement or other evidence that an amount equal to the distribution was rolled over into the plan. SInce one of your distributions was apparently NOT a direct rollover, the IRS would also want evidence of the date of the rollover to be sure it was done within 60 days of the distribution.