401K Question

[Justataxguy]

New client last night said he took a 401K distribution but never got a 1099. I tried to pull up info for him online, but could not find anything. He called company today, they have no record of a 2012 distribution. On his 2011 return, there are 2 1099s, one for a distribution and one for a rollover. He took the distribution in December 2011 and was advised to take half then and then take the rest in January 2012 to lessen or spread out the tax consequences. He has check stubs for both amounts dated in December 2011. I am thinking that the company mistakenly gave him the rollover when there wasn't one. He is worried the IRS is going to "throw him in jail" if he doesn't report the supposed 2012 withdrawal. Since the company has no record of a 2012 distribution, it should be safe to assume that none was reported to the IRS, correct? We both want to make sure we are doing the right thing.

[DaveinTexas]

Was the distribution a Conversion to a Roth IRA?

New client last night said he took a 401K distribution but never got a 1099. I tried to pull up info for him online, but could not find anything. He called company today, they have no record of a 2012 distribution. On his 2011 return, there are 2 1099s, one for a distribution and one for a rollover. He took the distribution in December 2011 and was advised to take half then and then take the rest in January 2012 to lessen or spread out the tax consequences. He has check stubs for both amounts dated in December 2011. I am thinking that the company mistakenly gave him the rollover when there wasn't one. He is worried the IRS is going to "throw him in jail" if he doesn't report the supposed 2012 withdrawal. Since the company has no record of a 2012 distribution, it should be safe to assume that none was reported to the IRS, correct? We both want to make sure we are doing the right thing.

The opportunity to report as income half of the converted IRA should have been on the 2010 tax return. Ask the client if his intention was to convert his Traditional IRA to a Roth. If so, you should probably ask him for his 2010 tax return and review the form 8606 for 2010 and 2011.

That would be where I'd start.

[Justataxguy]

The opportunity to report as income half of the converted IRA should have been on the 2010 tax return. Ask the client if his intention was to convert his Traditional IRA to a Roth. If so, you should probably ask him for his 2010 tax return and review the form 8606 for 2010 and 2011.

That would be where I'd start.

He had just gone through a divorce and just wanted the money to catch up on things. He was pretty much clueless about the whole 401 thing in general. The 2011 return has a comparison of changes from 2010 and there is no indication of Roth conversion.

[Burke]

. On his 2011 return, there are 2 1099s, one for a distribution and one for a rollover. He took the distribution in December 2011 and was advised to take half then and then take the rest in January 2012 to lessen or spread out the tax consequences. .

He was advised to "take half?" Who advised him to do that? Sounds like you have an amended 2011 on your hands. And he is likely to get an IRS CP letter on this eventually if he did not report the entire amount.

[Justataxguy]

He was advised to "take half?" Who advised him to do that?

I don't know if it was his former preparer at the green square chain or someone from the 401 company.

Sounds like you have an amended 2011 on your hands. And he is likely to get an IRS CP letter on this eventually if he did not report the entire amount.

The 2 1099s were reported on his 2011 return just as they were received, one with code 1, the other with code G.

[Bonnie]

Well, sounds to me like he actually got both in 2011 and reported both in 2011. Just because he was advised to take half each year, doesn't mean it actually happened that way. OP says he has both check stubs dated in 2011

[Burke]

Sorry, I mis-read the post. I thought you were saying he got all the distribution in 2011, but was told to "take" 1/2 on his tax return for 2011 and the other half on 2012. Or is that what you were saying?

Also, are you saying the one 1099R shown as a rollover was not actually a rollover?

[Roberts]

If he did his rollover in December of 2011 and received the G-code 1099-r, it's highly unlikely they allowed him to keep some money in the account and distribute the rest in 2012. It's not common at all to have a 401-k rollover for a partial amount. JMO. If he did a 2012 distribution it would more likely than not be from the group where he rolled the money into an IRA.