Last year my wife rolled over her IRA from Banc of America to an IRA at Chas. Schwab and Co. The made the check out to Schwab FBO (insert wife's name) and was deposited it the Schwab account in short order.
We received our 1099-R from National Financial Services, LLC for the money that was removed from Banc of America and they have put a 1 in Box 7 making it appear that this was a cash out as oppose to roll over. Do we need to get them to send us a corrected form or is there another way in Turbo Tax to prevent this from appearing as taxable income since no income was realized from the roll over?
snipped-for-privacy@verizon.net (in Technicolor®) posted:
I can't speak for Turbo Tax, since I've never used it, but when one enters a 1099R in TaxWise, all you do is scroll down and you'll find some options for disposition or clarification. One of them is "Amount rolled over into another account."
If you simply enter the amount indicated on the 1099R in that space, the system recognizes there is no tax due.
Errors in coding are common. You can certainly request that Banc of America Securities arrange for National Financial Services to produce a "Corrrected 1099R" which properly reflects the rollover. But the most important thing is correctly entering the facts on your tax return.
I think since you took physical possession of the funds, the 1099 is correct. If they had sent/wired the money to Schwab, it would be different.
Not to worry though, there's a line on your 1040 that shows that you rolled it over into another IRA yourself. The transaction is reportable but not taxable
No. There was no error. From the bank's perspective, you took a distribution before the age of 59 1/2 (I presume). Even though the check is made payable to Schwab, the bank has no way of knowing that you did indeed deposit the funds into a qualified IRA within
60 days.
I have forgotten how this is handled in TurboTax per se.
In general, the rolled over distribution is recorded on line 15a (2008 Form 1040), and zero is entered in line 15b, assuming the entire distribution was rolled over.
I am pretty sure that TT walks you through this. But if it is not obvious how, you should contact TT. (Do they have an online chat service?)
Sanity check: Since this distribution was presumably before age 59 1/2, you should ensure that neither the bank nor TT assessed the 10% early-withdrawal penalty (line 59 of 2008 Form
If they made the check payable to schwab they have reasonable cause to mark this as a exception to the early distribution no known exception situation. They should have coded it a 2.
Neither banks nor TT have any authority to assess any tax at all.
You report what happened and if you then owe tax, you state it on your return.
And if you do not have taxable income so no tax, you report that as well.
First or all, whether they coded it as a 1 or a 2, that does not change the way in which it should be reported on Form 1040. And it should not change the way in which the OP should handle it using TurboTax. I would not request a corrected 1099-R unless it made a difference.
Secondly, I don't believe that any of the code 2 exceptions apply, as they are explained in the instructions for Form 1099-R (pg 11).
I will grant you that I was being overly cautious, arguably unduly cautious, by including the bank it that warning.
But TurboTax is a tax preparation program, and as I noted, the 10% penalty is reported on Form 1040.
TT does all sorts of things automatically on behalf of the taxpayer. And as a TT user myself, I know how confusing some of its prompts can be, resulting in unintended actions by TT. I cannot tell you how many times I have toiled for long minutes to work around some of TT's assumption that would cause a reporting error.
I am sure that TT is not unique in that regard. Users of tax preparation programs should always be on the lookout for errors introduced by the tax preparation program.
(Of course, human tax preparers make their own share of mistakes. But at least you can have a conversation with them and come to a common understanding.)
I went through this drill with a 401k to 401k and my 401k to IRA. In both cases I filled out a form requesting a "DIRECT ROLLOVER" to the bank issueing the check. It was always an option for me on the distribution request. I always got a check made out to Fidelity FBO and the
1099's always showed the correct code (g). Don't know if you had that option but if you didn't request a direct rollover I don't think you'll get the code (g) from the issueing bank/security house.
One last thing. When I rolled over my ROTH last year the only way I could avoid triggering a 1099-R was by having the bank I had the money in do a "Custodial Transfer". The banker at the recipient bank told me that and the bank holding the money confirmed it. The bank I withdrew the money from charged me a 20.00 fee for this service. I've heard that some banks don't charge a fee but it takes a week of 2 for the initial custodian to send it to the recieving bank. I don't know if youcan do this with traditional IRA's.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.