A Form 1099R Question

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A client receives a Form 1099R for a traditional IRA distribution. It is the intention of the parties, i.e., the client and the plan administrator to "rollover" the majority of the distribution into another traditional IRA with the amount not rolled over becoming part of the client's RMD for calendar year 2006. Plan administrator codes box 7 as a 7, includes the total amount of the distribution in box 1, and repeats that same number in box 2a. As currently prepared the full distribution amount shown on the Form 1099R is fully taxable. Plan administrator tells client that everything will be straightend out in May when the Form 5498 is prepared. If I'm understanding the procedures outlined on page R-3 of the IRS "Instrutions for Forms 1099R and 5498" this should be a two '1099R requirement; the first Form 1099R showing the rollover amount in box 1, "0" in box 2a and Code "G" in box 7. The second Form 1099R should then address the "taxable" portion of the distribution in the usual way with the (RMD) amount in box 1 and a repeat of that number in box 2a and then Code 7 in box 7. Plan administrator doesn't (at this point at least) seem receptive to this idea albeit we haven't had a good discussion as yet.

I think some procedural errors exist in this situation that require correction.

I know it has taken me a long time to get to my question, but before I go charging ahead...am I on firm ground here?

Appreciate any comments and/or advice.

Thank you in advance,

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[OldJack]

No your ground is quite soft.

As you know, Code G is for a direct rollover from one IRA to another IRA where the taxpayer never has the money.

The same thing is accomplished if the 1099R shows code 7 for the full amount and then within 60 days rolls the full amount into an IRA account. The same thing is accomplished for a code 7, if the full amount less the required minimum distribution is rolled into an IRA account. There is no need for 2 1099R forms although that would make it easier.

I expect you are having a problem with how to enter a rollover when it is done within the 60 day period. With most software you simply adjust the 1099 taxable amount or rollover box to make the taxable what it should be on the tax return.

Also, it is good idea to print the words "Rollover" on the 1040, page 1, line 16 or on the blank space of line 21 "16a Rollover".

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A Form 1099R Question

Thank you OldJack for your response. I shall look further into how the break-out of the distribution has been established by the plan administrator for reporting on the client's tax return.

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