1099R Question
Individual withdrew money in December of 2019.
The 1099R is showing taxable amount $0.00 and code “8” in box 7.
Will this distribution be considered taxable in 2020?
Will the individual need to provide the details above via explanatory statement which will confirm the 1099R “$0.00” taxable amount? Thank you for all the help. Your knowledge is tremendous.
- The custodian messed up since they are not authorized to provide corrective distributions of rollovers unless the rollover was not allowed (eg it was an RMD, or excess deferral to 401k, etc). This rollover was entirely legal, so it should have been withdrawn as a normal or early (under 59.5) distribution subject to tax.
- My initial concern that the required explanatory statement will not conform to the 1099R or the 5498 that the custodian has issued reporting a rollover contribution. Neither will the 2019 return reporting a taxable distribution conform to the 5498 reporting a rollover contribution of the same amount.
- The taxable income is the same, but would be in 2020 instead of 2019 if this was done correctly. The technically correct solution would be to convince the IRA custodian to issue a corrected 1099R showing a early contribution (no code 8) and the individual would amend the 2019 return to report a rollover, eliminating the taxable income and generating a refund on the 2019 return. The 2020 return would show a taxable distribution reported on the corrected 1099R, and everything would then be in sync.
- If the custodian will not agree to correct the 1099R (2020 1099R already issued?), then Plan B would be to just report the 1099R as issued and not include any explanatory statement which would be inconsistent with the 5498 coding. The IRS will most likely not notice the inconsistency, but no guarantees.
Permalink Submitted by Alan - IRA critic on Tue, 2020-12-01 22:27
Was the Feb rollover coded by the custodian as a rollover contribution or a regular contribution? The statement for the IRA should clarify that, or a 5498 form if the deposit was coded as a 2019 regular contribution. Had the individual already used up the one allowed 60 day rollover before the Feb return of the distribution? Since tax reporting should include an explanatory statement for the removal of an excess contribution, the individual needs to determine first if they were not eligible for a rollover AND ALSO if the custodian reported it as a regular instead of a rollover contribution. The 1099R itself showing 0 in Box 2a indicates no taxes are due, but the explanatory statement should conform to exactly what happened. Therefore, more info is needed if the explanatory statement is to make any sense.