Ask the Tax Pro: What Am I Supposed to Do With This 1099-R?

Here’s the redacted version of what David asked:

In 2010 a previous employer informed that they were forcing me to take my 401K contributions out of their plan and roll it into another IRA of my choosing. According to their rules, I had enough capital in the account such as they couldn’t force me to take an early distribution, but not so much that they couldn’t force me out of the employer-subsidized account.

I procrastinated getting in the necessary paperwork with instructions as to which provider to transfer funds to. The funds were subsequently sent to E-trade securities, LLC. rolled into an IRA rollover account. I then had E-trade perform an ACAT transfer to my preferred carrier.

I also moved other assets from UBS to AIG/Valic. However, in this instance, I requested UBS disburse me an early distribution check, due do the fee-free transaction. I immediately mailed the capital to AIG via personal check after the EFT disbursement from UBS cleared my checking account.

Now, it appears that I should be receiving a few Form 1099 as well as Form 5498. I’ve currently already received the 1099 forms but no 5498′s. How does this affect my filing? Are there any special tax forms that need to be prepared? How do I account for these transactions, although all funds/distributions were completely rolled into qualifying IRA plans, given the fact that I’m being told that the Form 5498 won’t be sent until after May31st and the 2010Tax deadline is April15th? Wheh!

I say:

First, I feel like I should apologize since David’s been waiting quite a while for a response—he may have even received those 5498s already.

So, Davide, my apologies. This year, tax season started with a bang. And it started out with really complex returns that took more research than normal, so sleep has been very hard to come by. But, alas, here’s my response, and I hope it helps.

Employers are required to give those individuals that participate in their plans an option to have an eligible rollover distribution paid directly to a traditional IRA, so long as the amount of the distribution isn’t less than $200.

Let me explain what a Form 5498, IRA contribution Information, is. Like it’s name suggest, it reports information on contributions, rollovers, conversions, and recharacterizations to both you and the IRS. It also reports the FMV of the account at the end of the year, which is needed mostly for required minimum distribution purposes and in calculating the taxable portion of an IRA distribution.

The amounts of each distribution is reported to you and the IRS on Form 1099-R. So on Form 1040, you report the total distribution shown on line 16a, and the taxable amount on line 16b for all except distributions from an IRA—those distributions get reported on line 15a, with the taxable portion on like 15b. You’ll know if they belong on line 15 if the IRA checkbox in box 7 of the 1099-R is checked.

If all the distributions were rolled over to a retirement account, whether directly from one trustee to the next, or through a complete distribution to you and then transferred to another account then the amounts shouldn’t be taxable.

I’ve given you a pretty quick and dirty response to qualified plan distributions. Your age, whether they were rolled over within 60 days of the distribution, and a number of other factors can come into play. You should definitely check with your accountant regarding how these distributions will affect your specific tax situation.

Disclaimer: like any decent tax professional will tell you, since you’re not currently a client of mine—though you can be—it’s almost impossible to provide complete and accurate tax advice over the internet without being aware of the taxpayer’s entire situation; therefore, I suggest you consult your tax professional before relying solely on any information provided on this site.

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