Ira Rollover Within 60 Days

[zeros]

Client has two 1099R's where she received the distribution but rolled into an annuity with 60 days. Is there any entry that needs to be done on the 1040? The holder of the annuity is issuing a form to report receiving the rollover.

[ChEAr$]

Client has two 1099R's where she received the distribution but rolled into an annuity with 60 days. Is there any entry that needs to be done on the 1040? The holder of the annuity is issuing a form to report receiving the rollover.

Are you sure the "annuity" is an IRA annuity? Or qualifies for rollover?

Of course I just bet the insurance agent assured her it was.

[appelman]

If it does qualify...

See instructions for Form 1040, lines 15a and 15b.

[taxea]

Need more info

Was this a direct rollover from company that held it into company that now holds it?
Or did your client receive checks and open the account it was put into her/him self?
Did the gross of the two 1099's get rolled over into the new account or did the client accept a check for either of the 1099 amounts?

Most importantly does the 1099 show a G in box 7? If not, what is the code in box 7?

Has client received 1099s from the company that distributed the funds?

[zeros]

More Information

Was this a direct rollover from company that held it into company that now holds it?
Or did your client receive checks and open the account it was put into her/him self?
Did the gross of the two 1099's get rolled over into the new account or did the client accept a check for either of the 1099 amounts?

Most importantly does the 1099 show a G in box 7? If not, what is the code in box 7?

Has client received 1099s from the company that distributed the funds?

This was not a direct rollover. Client received the money but reinvested within 60 days. He had two 1099R's indicating that it is a total distribution. Code 7, IRA. No withholding on either.

[Jesse]

If 100% of proceeds were rolled into another qualified plan you need to report it as an IRA distribution on line (a) and the taxable amount on (b) is $0 and write "ROLLOVER" on the (b)line.

[BP.]

And save copies of the documents funding the rollover account. Seems these often need to be sent in response to a notice later on.

[FEDUKE404]

Be certain ALL the rules were met

This was not a direct rollover. Client received the money but reinvested within 60 days. He had two 1099R's indicating that it is a total distribution. Code 7, IRA. No withholding on either.

This sounds like a distribution which was later rolled over, as opposed to a (direct) rollover distribution shown on the Form 1099-R with a code "G."

The tax effects are the same if the recipient made the rollover into 1) a qualifying account and 2) within the specified time frames. You will likely have to "instruct" your software that this event occurred, and as others have noted the term "rollover" will appear on the Form 1040.

There is one issue you need to clarify: A good approach is "never touch the money!" Be sure you do not have a situation where there was income tax withholding, let's say the customary 20%. The client may tell you he rolled over "everything," when in fact he only rolled over the 80% he received. I've had several clients who found out that fact too late, so they were not only looking at unexpected taxes but also the 10% penalty that appears on Form 5329.

Oh yes: chEAr$ makes an extremely valid point !! Some annuity salesmen will do/say just about anything to result in a purchase ( = nice commission).

FE

[taxea]

The issuer of the 1099 distributed the income. The document from the now holder of the account should provide you with all the information you need to properly complete the 1099 information required on the return.

Tip: whether or not a 1099 should have been issued for anything, if you can't get the issuor to correct it in time to file the return then you must report the 1099 on the return. The IRS computer will spit out a CP2000 if you don't.

[JohnH]

I just recently finished clearing one up from 2009. Sleazy financial advisor had the money sent to the client so he could get them to put it into a highly questionable self-directed IRA. (bad ideas all around, but of course I didn't learn of it until tax return time because nobody thought to ask me)

Client received a 1099-r with code 7. I reported it on the 1040 with ROLLOVER entered on the proper line. IRS ignored it - they sent a CP2000 with a bill for the full tax due back in October 2011. We had to send proof of the tranctions on both ends (the 1099-R doesnt provide the distribution date). Finally got a closing letter about 3 weeks ago after a couple of letters back & forth.

In the meantime the Self-Directed IRA has imploded, and I still don't think the client believes me when I tell them there's no tax deduction for the loss. They're just lucky the idiot financial advisor did at least meet the 60-day test back in 2009. Otherwise they'd have had a $10k tax bill plus a capital loss they would have only been able to write off over 10-12 years.

[S T]

Financial Institutions

While some of the larger Financial/Investment Institutions often know the rules and regulations, I still find errors, and the smaller Institutions (some credit unions) often have it wrong from the beginning.

Best advice, is make sure the Client have all documentation and that you also have a copy to file for future reference as a backup.

I have had some of these transfers "haunt me" for a few years and the CP2000 notices. It can literally take over a period of 6 -9 months to clear up.

Sandy