G4 Distribution Code Question
This may be outside your expertise but I found it interesting… any insight?
-Taxpayer owned an annuity within a qualified plan at Northwestern Mutual.
-Taxpayer passed away and a 1099R was generated. In box 7 (distribution code) it was listed as G4, which indicates a direct rollover at death.
-However, the 1099 showed a gross distribution of $1M and a TAXABLE distribution of $600k.
-Upon calling NWM, NWM said the 1099R was correctly filled out; however, even though the 1099R shows a taxable distribution of $600k, nothing was taxable due to a direct rollover to qualified account.
-Taxpayer is confused and unsure how the IRS will handle this, since the 1099R clearly indicates a taxable distribution.
Any insight/guidance? Accountant is confused, as well.
Thanks!
Permalink Submitted by Alan - IRA critic on Fri, 2023-04-14 17:05
The 1099R is incorrect. Unless the direct rollover was to an inherited Roth IRA per Sec 408A(e), Box 2a should be 0. It appears that the plan thinks this direct rollover was made to an inherited Roth IRA, which occurs very infrequently. Refer the plan to the 1099R Inst for direct rollovers (not to a Roth IRA). If that’s the case they need to issue a corrected 1099R with 0 in Box 2a.