How to ‘reverse/rollback’ my 2020 RMD taken from my single participant solo401k and deposit it my ROTH IRA(CARES ACT)

Submitted by Alice Zab on Tue, 2020-07-28 15:58

I am unable to find any instructions to reverse the 2020 RMD and how to report (what IRS forms?) the “REVERSAL or rollback or return” to my solo401k or preferably rollover to my Traditional IRA.
Feb 2020, I took my 2020 RMD (no tax w/h) from my solo401k. Cares Act allow ‘reversal or rollback’ by August 31, 2020.
Please let me know if the following is correct to reverse the 2020 RMD withdrawal and eventually deposit in a ROTH IRA and the IRS reporting forms required for each step.

Step 1: Instruct my 401(K) administrator to
(1a) REVERSE my 2020 RMD amt (no taxes w/h) to return the funds to my 401(K) or
(1b) DIRECT ROLLOVER my 2020 RMD amt (no taxes w/h) to my Traditional IRA. (preferred if allowed)

If (1a) is recommended, what IRS form do I report the “reversal” and what boxes on the form is filled?
(1a.i) Do I report the Feb 2020 RMD amt on 2020 IRS 1099r, with distribution code 7 in box 7?
(1.a.ii) What IRS form do I report the “reversal?” back to the solo401k?
(ii.a)Would the “reversal” be considered a contribution – if so, the amount will exceed the contribution amount for 2020.
(ii.b)Would this new contribution in addition to the solo401K contribution already made be reported on the 2021 5500ez?

If (1b) is recommended (hopefully), what IRS form do I report the “rollover”
Do I report the Feb 2020 RMD on 2020 IRS 1099r, with distribution code G in box 7
Other IRS Forms for (1a) or (1b)?

Step 2: If (1a – reversal) is recommended, instruct my 401K administrator to do a DIRECT ROLLOVER (2020 RMD (w/ no tax w/h) from the solo401k (after the reversal) to my Traditional IRA, following (1b rollover step)?

Step 3: Instruct my IRA administrator (who is also my 401k administrator) to convert the 2020 RMD amt to the ROTH IRA.
Thanks in advance!



Submitted by Alan - IRA critic on Tue, 2020-07-28 18:46

  • It’s your choice to either return the RMD to your solo K or to an IRA. You will have to write a check since the amount has already been distributed to you. Your solo K may not accept rollovers, so you might have to return the distribution to either a TIRA or Roth IRA (taxable rollover contribution). If you want the distribution to be rolled to your Roth IRA in a single step.
  • A 1099R (Dist code 7) will have to be issued by the solo K reporting the prior distribution. If you roll it back or to an IRA, you would just report a rollover on lines 4c and 4d of Form 1040 like any other rollover of a non IRA distribution. No extra form needed. These are rollover contributions, not regular contributions and would not go on the 5500 EZ.
  • 1b cannot be a direct rollover, it would be an indirect rollover of a Code 7 distribution. If you rolled it to an IRA, the IRA custodian will issue a Form 5498 reporting a rollover contribution. There is no corresponding form to be issued by the solo K if the distribution is rolled back to that plan.

Submitted by Alice Zab on Tue, 2020-07-28 21:58

“1b cannot be a direct rollover, it would be an indirect rollover of a Code 7 distribution”In addition to distribution code 7 in the 1099r Box 7, do I also check [IRA/SEP/SIMPLE] which is also in Box 7?Again, thank you.

Submitted by Alan - IRA critic on Tue, 2020-07-28 22:02

No, the IRA box is only checked if the distribution is from a TIRA, SEP, or  SIMPLE IRA. This distribution is from a 401k. The box identifies the type of plan making the distribution, and not the type of plan receiving a rollover.

Submitted by William Tuttle on Wed, 2020-07-29 03:22

  • IRA accounts only have custodians and trustees.
  • 401k plans have custodians, trustees, record keepers/primary administrators, etc…
  • If you have a one-participant 401k plan from a mainstream brokerage (E-Trade, Fidelity, Schwab, TD Ameritrade, Vanguard, etc…) or a TPA they typically act as everything except for some self administration (contribution calculations/timing, Form 5500-EZ reporting if necessary, some compliance issues, etc…). The brokerage or the TPA will file any necessary Form 1099-R. The taxpayer only uses their copy to complete their tax return.
  • Only if you are fully self-administering your own DIY 401k plan with just a 401k plan document and adoption agreement from a document provider/reseller will you need to be filing your own Form 1099-R.
  • The taxpayer will report this rollover on Form 1040 lines 4c/d.
  • The 401k plan if required to file Form 5500-EZ; will report participant, employer and rollover contributions on lines 7a/b/c respectively. 

    • Submitted by Alice Zab on Wed, 2020-08-19 16:18

    I thought an 2019 RMD is required before Dec 31 2019. According to CARES Act if you were waiting until the April 1 deadline to take your RMD for 2019, you are allowed to also skip the 2019 distribution.  Under normal circumstances (no Cares Act), what is the penalty for taking 2019 by April 1 2020?  Is the RMD then reported on 2019 1099r  or 2020 1099r with 2020 RMD?Thanks in advance. 

    Submitted by Alan - IRA critic on Wed, 2020-08-19 16:43

    There is no penalty for deferring the first RMD to the RBD year as long as the RMD is complete by 4/1 (the RBD). However, there will have to be 2 RMDs in the RBD year in that situation, both taxable in the RBD year and reported on a 1099R for the RBD year. That 1099R will add up all distributions (RMDs or not) with no breakdown shown which year they are for.  All distributions taken from 1/1 to 4/1 in the RBD year are first applied to the prior year RMD.  Sometimes there are strategic reasons such as the amount of SS included in AGI that produces a lower total tax over the 2 years when all or part of the first RMD is deferred.  You would have to crunch the numbers near year end of the first RMD year to determine if it will save to defer all or part of the first RMD.

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