1099-R help please!

[DonB]

Continuing on-- If it were me, I would file the 8275, report the 1099-R in the appropriate place and make the correction adjustment on 1040 line 21. But how to back out the early distribution 10% tax??

[Burke]

Do you think treat the Lowe's 1099-R as all rolled over and then his early distribution as normal from the Wells Fargo IRA?
He never received a 1099-B or anything. Your help is appreciated!! Please.

1. Yes, and attach Form 8275.
2. He would not have gotten a 1099-B. He would have gotten a 1099-R from Wells Fargo on the distribution, which you said he did. If he is under 59 1/2, penalty is imposed.

[DonB]

The client Left Lowes. And he rolled over his 401K to Wells Fargo IRA and then he took a distribution out of the IRA. I got the statements from Wells Fargo and it was stock that had rolled over to Wells Fargo. Then the stock was sold for his distribution. I have Wells Fargo Statements showing it as a direct rollover. Taxpayer never touched it.

The Lowe's 1099-R has
Box 1. $41,768
Box 2. $20,433
Box 6. $21,335
Box 7. code 1

The Wells Fargo 1099-R has
Box 1. $41,646
Box 2. $41,646
Box 7. Code 1

From IRS:
If the lump-sum distribution includes employer securities and the payer reported an amount in box 6 of your Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for net unrealized appreciation (NUA) in employer securities, the NUA is generally not subject to tax until you sell the securities. However, you may elect to include the NUA in your income in the year the securities are distributed to you.

The Lowe's 1099-R is reporting the distribution as one going to a taxable account. IMO wrong. WF issueing a 1099-R gives me confidence in your assertion that the transfer was to an IRA.

[nwtaxlady]

Lion...

Start with IRS Pub. 575

Yes, I read it and the part about Distributions of Employer Securities.
I am still unsure of how to treat my clients situation. Here's a recap with detailed info.

Client worked at Lowe's and left. He took his 401K and rolled it ALL over directly to Wells Fargo IRA. Never touched it.
A few months later the client took the money out of the IRA (early distribution).

Client has:

1099-R from Lowe's with
Box 1. 41768
Box 2. 20433
Box 6. 21335
Box 7. Code 1

1099-R from Wells Fargo IRA
Box 1. 41646
Box 2. 41646
Box 7. Code 1

Client has statements from Wells Fargo showing the rollover.
Also statement when he took the distribution from the IRA and that statement shows Lowe's stock sale of 531 shares.
Also has a form 5498 from Wells Fargo with the Rollover Contributions of $41418.

So how is his situation handled?

Thanks for your help!