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1099 On IRA Account

Anon456
  |     |   249 posts since 2011

I got in a 1099R from my IRA CD which got transferred to another credit union. They had coded it as an IRA Rollover, showed the dollar amount, then showed the taxable amount as zero. Also had a code G in box 7.

I called and complained. Initially was told to just take it to my tax preparer for them to handle. I advised them I WAS that tax preparer, and there is no way to handle roll-overs when reported on a 1099 when they in fact are NOT distributions and NOT rollovers, but ARE direct transfers. Direct transfers DO NOT get reported to the IRS, nor does the customer get a 1099.

When they checked into it, they agreed they had made a mistake, and finally issued a correcting 1099R with zero in the reported amount (box 1).

Point of this message is that many bank or credit unions fail to understand the importance of handling and reporting of direct transfers. They are still operating under the OLD RULES where anytime IRA money leaves, they call it a distribution or a rollover, and expecting that with a roll over then being closed with a 5498 to show it as an off set for taxes. NOT TRUE anymore. They can cause a taxable event by showing it as a distribution. Trustee to Trustee direct transfers (these ARE NOT direct "ROLLOVERS") are NOT distributions and NOT a reportable event.

IF you get a 1099 on an IRA transfer that was done via direct transfer from the new custodian, do not wait until tax time to get it corrected. Make sure the old custodian understands that it is a transfer, and NOT a roll-over distribution. Fix the error with a 1099 (CORRECTING BOX CHECKED). Make sure you always keep a copy of the IRA transfer documents that show you are instructing the NEW custodian to make the transfer, and that new custodian contacts the old custodian to make it happen. You are NOT in the middle, nor do you ever take possession of any funds.  You may need that copy just to help make your point if the IRS does try to claim that this transaction is reported as a taxable distribution.

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Ally6770
  |     |   4,307 posts since 2010
Not sure checking the Corrected Box yourself is a prudent idea. The bank or credit union sends a copy to the IRS of all of this. They will send you a corrected 1099 as well as to the IRS.
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Anon456
  |     |   249 posts since 2011
Good catch. I was NOT clear. I did mean for the corrected copy to come from the CU. IRS will not accept it from me. I should have been more clear, but since 1099 (corrected or not) always come from the source, I just assumed it made sense. BUT YES, it needs to come from them, and not just altered just by the taxpayer.
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Ally6770
  |     |   4,307 posts since 2010
Am doing my tax return. When I got to the part of the amount on the 1099 R in the tax product that I am using it actually asks if any part of the amount was a rollover or any part of it was a Roth conversion.
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Anon456
  |     |   249 posts since 2011
You can adjust your tax return on ONE rollover per year (only one for ALL of your IRA accounts) without it being taxable. So be careful with those. Also - - these are technically NOT rollovers, rather they are direct transfers.
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Ally6770
  |     |   4,307 posts since 2010
It was just a conversion to a Roth at the same institution and it was added to an existing Roth IRA. So it was not a rollover but not even a transfer. This is a great benefit of Navy Credit Union. My Roth there is over the limit but the CD will mature in 2018. I like with the RMD's there that they always take it from the lowest interest traditional IRA CD and this year it even closed the lowest paying traditional CD and it is not like Pentagon where you have to keep a $1,000 in the CD or pay the penalty on the withdrawal. But the secret at Pentagon is to take it all out but $1,000 and the following year take out the $1,000 with only a little penalty if you want to close that one.
I always take my RMD around Dec 20th and also do the conversion at that time because I pretty much know my income at that time and try to get as close to $85,000 including the conversion so that the Medicare premium will not go up and I have the conversion money put in the Roth IRA savings account until the day after Jan 1, when you can add the money to an existing Roth IRA CD that you have at Navy. Thanks to Ken (again) telling us this many years ago when I was able to join a credit union that Navy was purchasing and now a member.
PS. That rollover is allowed only once every 365 days and not once a calendar year. Thanks for watching out for us members. 
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Ratesaver
  |     |   187 posts since 2013
I just got a 1099r as per my direct transfer to another credit union... They coded it as a in box 2 as a rollover IRA... Without going into to much detail the prior holders of my IRA before distribution as I requested a direct rollover sent me 2 checks ... I was mad.... However, they informed my they took my RMD out for this yr. I forwarded one check to the Credit Union and took copies of everything , kept the other check as MY RMD. I sent it to my savings acc... The RMD amt. is on the 1099r and I guess it will be considered as a distribution of some sorts... I did not ask them to take this money out they just did it... They also took out tax... They sent a 1099 for that.... Crazy """
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Ally6770
  |     |   4,307 posts since 2010
If they sent a RMD and you have already taken your RMD from someplace else they will take it back if you have not deposited it. This happened to me once even though I said and sent a letter that I would request my RMD from them only if I decided to get it from them.
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