2008 1099-R taxable in 2007?

[AZ-Tax]

My client received a letter that he received a retirement distribution due to the fact the plan did not qualify and the letter states its taxable in 2007 and will be on a 2008 1099-R for which my client obviously does not have. I have no Fed ID #, no code etc.

Anyone have this experience?

[Koss]

Code P

The link below is for the info copy of the 2008 version of Form 1099-R:

http://www.irs.gov/pub/irs-pdf/f1099r.pdf

Go to page 9 of the PDF and take a look at the description for Code P.

[ecb34691]

Yes Koss, but what code do you use in the prior year? I've got one now. 2007 1099R with code P. When I go to 2006 software and use P of course it tells me it's 2005. For 2006 what code should I use - 1, 2, 7 other? About $900 that's got to be added to 2006.

[Koss]

Corrective Distributions

http://www.irs.gov/pub/irs-pdf/p525.pdf

See page 9 of Pub. 525. The discussion of how to report corrective distributions begins at the very bottom of the page.

This sort of thing is just goofy enough that with some of the lower-end tax prep software programs, you will either have to lie to the program and use a different code to get it to populate into the correct field, or you will simply have to do a manual Form 1040X or something.

If you lie to your software and get the correct outcome on Form 1040, you can file the return, and it may be okay to file electronically if there is no withholding on the 1099-R.

But technically, when you file electronically, you are not permitted to alter the data on a 1099-R. So if you are at all paranoid about e-file regs, maybe the return should be filed on paper.

[AZ-Tax]

I have no 1099- R and Fed ID#?

My client has yet to receive the 2008/1099-R so I have no Fed ID number and my code P on my 1099-R wkst software says '"Return of contributions taxable for 2006".

If my client calls, will they give him a Fed ID# and a Code?

[AZ-Tax]

Code 8 looks like the answer but what about Fed ID#?

Code 8 on my 1099-R wkst software has "return of contributions taxable in 2007" so looks like that is solved but what about the Fed ID#?

[Koss]

1099-r

Without a federal ID, you won't be able to file the return electronically.

With or without it, you can prepare a substitute Form 1099-R, using the same form that is used for a substitute Form W-2 (Form 4852, or something). The instructions for that form explicitly say that it can be used to prepare a substitute Form 1099-R.

[Roland Slugg]

It's goofy, but here's how it works

The excess 2007 deferral your client just got back needs to be reported on his 2007 return. On your software's 1009-R input screen indicate that the taxable amount is the same as the distribution. Use Code P. This will (or should send the amount to the "wages" line on F-1040 ... line 7. Do NOT use Code 8, as someone else suggested ... that is for something else.

Your client will probably receive a 1099-R form next January reporting this same amount. On next year's return enter the amount on your software's 1099-R screen, again, also using Code P, but next year show the taxable amount as "0".

If you don't report the refunded 2007 excess deferral on your client's 2007 return, he will be obligated to file an amended return for 2007 to report it later ... and, of course, pay the tax, plus interest. For that reason it's much better to report these on the current year's returns before they are filed.

Clients don't always tell you about these because they get the refund in the following year (typically in February or March 2008 for 2007), and the accompanying letter refers to a "2008" form 1009-R form. So it's understandable why they are unsure about these things.

There is an exception to the above for small refunds ... the amount is $100, I believe (maybe $200) ... that permit the refund to be reported on the following year's return.

[David1980]

Code 8 vs Code P

Code P is for excess contributions + earnings taxable in a prior tax year.
Code 8 is for excess contributions + earnings taxable in the current tax year.

In this case, we're talking about a 2008 1099R that won't be received until 2009. So it is taxable to the 2007 tax year, but won't be received for nearly a year.

Some software always assumes code P is prior year. Even if you're in the prior year software. So you might put it in the 2007 software only to have it tell you this should be done on 2006. Then put it on the 2006 software and have it tell you it's a prior year code and should go on 2005 year. Continuing back indefinitely (well I suppose eventually the code P will probably not exist.)

So you kind of have to cheat it by putting it in as a code 8 in the prior year software, even though it's actually showing a code P. This will result in it carrying to the correct line. I would agree that this isn't proper for efile. Then again, how exactly do you enter the 1099R exactly as issued when it won't be issued for almost a year? I think in this case you would either override the line on the 1040 or enter it on a substitute 1099R form. If you did have a 1099R with a box 7 code of P it would be entered to the prior year which can't be efiled anyway.

Simple solution would be to paper file the return.