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March 6, 2009

Should rolled over amounts be on a 1099-R?


Should rolled over amounts be on a 1099-R?

Question I took a distribution of $10,000 from my traditional IRA last year. At my request, the custodian withheld 10% ($1,000) for federal taxes. 60 days later, I rolled over $7,000. In January of this year, I received a 1099-R for the entire $10,000, showing the withholding of $1,000.


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 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 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 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.


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