IRS Correction Procedures Addresses Correction for Failure to Adopt Written Plan for a 403(b)
“ ” The IRS released Revenue Procedure 2013-12 on December 31, 2012, which includes correction procedures for 403(b) Plans. Prior to the release of Revenue
March 6, 2009
Should rolled over amounts be on a 1099-R?
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Should rolled over amounts be on a 1099-R?
Question
I took a https://iradictionary.com/definitions/distribution distribution of $10,000 from my https://iradictionary.com/definitions/traditionalira traditional IRA last year. At my request, the custodian withheld 10% ($1,000) for federal taxes. 60 days later, I https://iradictionary.com/definitions/rollovercontribution rolled over $7,000. In January of this year, I received a https://iradictionary.com/definitions/1099rirsform 1099-R for the entire $10,000, showing the withholding of $1,000.
Answer
Yes. That reporting is correct. According to the IRS tax reporting requirements, the Form 1099-R must reflect the entire distribution amount, even if (all or a portion of) it is properly rolled over within the https://iradictionary.com/definitions/60dayrolloverrule 60-day period. The question then becomes, “How do you let the IRS know that only $3,000 is taxable?” The answer lies in your IRS Form 1040 (tax return). Here’s what you need to do:
• Input $10,000 on line 15a of your Form 1040. This must reflect the entire distribution amount, which in this case is $10,000
• Input $3,000 on line 15b. This shows how much of the amount on line 15a is taxable
• Enter ‘Rollover” next to line 15b
• Since taxes were withheld from your distribution, attach a copy of your 1099-R to your tax return
(Note: different versions of Form 1040 require the data to be inputted on different lines. For instance, for Line 1040A, the line number is 11, not 15).
You should receive a copy of https://iradictionary.com/definitions/5498form IRS Form 5498 from your custodian, showing the rollover contribution of $7,000 being made to your IRA. Keep it for your records, along with a copy of your tax return.
The IRS will also receive the information that is provided on your Form 5498, which will provide the confirmation they need that the $7,000 must be excluded from your income for last year.
• If you completed the rollover last year, the Form 5498 should be mailed to you by May 31 of this year
• If you completed the rollover this year (which is possible if the 60-day period ended in this year) the Form 5498 should be mailed to you by May 31 of next year
• Check with your IRA custodian to ensure they treated the deposit as a rollover contribution, and if not, make sure corrections are made before the 5498 is issued.
Important: This response is assuming that the $7,000 was rollover eligible. If the you already did another IRA or Roth IRA rollover during the preceding 12-months, then the amount is not rollover-eligible. The 12-month period begins on the date you receive the distribution.
Answer provided by http://applebyconsultinginc.com/ Appleby Retirement Consulting Inc. Appleby Retirement Consulting Inc provides Consulting, Coaching and Content on IRAs and other retirement plans to Financial, Tax and Legal professionals.
