How to CORRECTLY Report Tax-Free IRA-to-IRA Rollovers on Your Tax Return

Tuesday, April 08, 2014

By Joe Cicchinelli, IRA Technical Expert

Follow Me on Twitter: @JoeCiccEdSlott

As we approach the April 15, 2014 tax filing deadline, one of the things you have to report on your tax return is an IRA-to-IRA rollover. Whether you’ve already filed your taxes for 2013 or you’re waiting until the last minute, here is how to correctly report a tax-free IRA-to-IRA rollover. Don’t assume that because an IRA-to-IRA rollover is tax-free that it doesn’t need to be reported on your tax return; it has to be reported!

Even if you’re paying a professional tax preparer to do your taxes, you should make sure that you’ve given him or her the proper IRA information so that your taxes will be done right. The best tax preparers can make a mistake if you don’t give them all of the correct information.

Let’s say you received a distribution from your IRA last year and you timely rolled it all over, then there are no taxes owed. For example, we’ll assume you took a $15,000 IRA distribution but timely rolled over all $15,000 of it, so you don’t owe any taxes or IRS penalties. You should have received a copy of IRS Form 1099-R from the custodian that made the IRA distribution. That 1099-R shows, in box 2a, that the entire IRA distribution is taxable. But that’s not true if you did a tax-free rollover to another IRA within 60 days. So is this a problem? The answer is no, as long as you properly report it on your tax return.

All you have to do to show that your IRA-to-IRA rollover is tax-free is to report the IRA distribution amount and the taxable amount on the appropriate lines of your federal income tax return. Using our example above, on line 15a of Form 1040, you would report “$15,000” as an IRA distribution; on line 15b you would report “0” as the taxable amount, and then next to line 15b you would write “Rollover.”

The IRA custodian that received the IRA rollover, which could be the same financial organization that distributed it to you, has to report the rollover deposit to you on IRS Form 5498. You’ll get a copy of the 2013 Form 5498 at the end of May 2014 that shows you rolled over the entire IRA distribution. If you filed your 2013 taxes by April 15, 2014 (like most of us), you won’t have received your copy of the 2013 Form 5498 at that time. But don’t worry; you don’t need to attach Form 5498 to your tax return to claim the IRA distribution as tax-free. Just keep a copy of it for your records.
 

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