1099R rollover

[hisierra101]

I did not receive a 1099R regarding a rollover and filed my taxes in 2017.  I have now received a letter from the IRS indicating they received the 1099R. When I requested a copy of the 1099R from the company who transferred the money to the rollover account, it is filled out as though I personally received the money. It does not indicated it is a rollover. The money was transferred from an IRA to a Govt. Agency 457b Deferred Compensation plan. How do I address this issue when I contact the IRS to say it is a rollover to another plan and funds were not sent to me personally?

[macuser_22]

What code is in box 7 on the 1099-R?

Did you receive a check for the money and you deposited it into the 457 plan or was it a direct trustee-to-trustee transfer.

Did you report it on your 2017 tax return at all?

[hisierra101]

The money was wired to the 457 plan by the other Trustee.

I did NOT receive a 1099R from the initial sender and didn't realize I should have gotten one to include in my 2017 taxes.

I got a copy of the 1099R from the original sender and Box 7 says IRA.  No mention of it being a Rollover.

[hisierra101]

I received a 2511 form from IRS indicating I didn't claim income from a 1099R IRS received but I never received from the Trustee who wired the money to the 457b plan.

They are under the impression I pocketed the entire amount on the 1099R. They are unaware it is a Rollover.

I'm not sure how I am going to rectify this other than show the IRS that the entire amount of money was deposited in the 457b plan.

[VolvoGirl]

What is the CODE in box 7?  Should be a Single number or letter or 2 like G or 7.  The IRA is only the little box between boxes 7&8.  The Code might be 7 the same as the box number.

[macuser_22]

If it was an IRA then the IRA custodian was required by law to send the 1099-R to you no later than Jan 31, 2018.   There is nothing on a 1099-R from an IRA that indicates to the IRS where the  money went or if it was a rollover.

If you failed to report it as a rollover on your tax return then the IRS will assume that you took the money and tax you on it.

457 plans do not report to the IRS the receipt of rollover money - it is up to you to report it.

Call the IRS number on the letter you received and explain the situation.   They might only need you to send them a copy of the 457 plan statement showing the receipt of the money.    

[macuser_22]

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@VolvoGirl wrote:

What is the CODE in box 7?  Should be a Single number or letter or 2 like G or 7.  The IRA is only the little box between boxes 7&8.  The Code might be 7 the same as the box number.

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An IRA will never have a code G, only a code 1,2 or 7.  But in this case it does not matter since the 1099-R was not reported as a rollover on the tax return.

[BMcCalpin]

It is common for institutions to fail to send a taxpayer a 1099-R for trustee-to-trustee transfers, on the theory that there is no tax consequence anyway. Unfortunately, your IRS custodian did the worst of all worlds: sent an incorrect 1099-R to the IRS, but failed to send you a copy so that you could see that it was wrong.

There should be some paperwork (or an email) confirming that you asked the IRA custodian for a trustee-to-trustee transfer from the IRA to the 457b. In addition, there is likely some paperwork indicating that the 457b plan administrator received a trustee-to-trustee transfer from an IRA on or about the same date.

When you respond to the IRS letter, write out a brief summary of what happened and your belief that the IRA custodian incorrectly completed the 1099-R, and then attached the two documents showing that the custodian and the plan administrator both participated in a trustee-to-trustee transfer.

Don't call the IRS, unless the letter gives you a specific number to contact; the reason is that the IRS letter indicates that someone has been assigned to this "case", and you want to communicate only with that person or office (unless the letter says differently).

[following text deleted as non-responsive; see comments below]

[dmertz]

Movement of funds to or from a 401(k) 403(b) or 457(b) is always a rollover and is always reportable, not a non-reportable IRA-to-IRA trustee-to-trustee transfer, so "rollover" is indeed the proper term to be used for the transaction indicated in the question, apparently a "direct rollover."  An IRA custodian would likely only fail to issue a Form 1099-R for the distribution from the IRA rolled to one of these plans if the custodian mistakenly thought the funds were being transferred to another IRA.

[BMcCalpin]

Thanks, @dmertz , for the clarification. I admit to have been guided by IRS Tax Topic 413 which states that inter alia "A trustee-to-trustee transfer isn't a rollover ", although I could have read that too closely.

Upon further reflection, I looked at the IRS Instructions for the 1099-R and 5498. Unless I missed it (possible) every reference to 457 plans and the 1099-R is about distributions from a 457, not to the 457, as in this case. Note that the distribution from a 457 can be hybrid animal, a direct rollover.  "A direct rollover is the direct payment of the distribution from a qualified plan, a section 403(b) plan, or a governmental section 457(b) plan to a traditional IRA, Roth IRA, or other eligible retirement plan."

The only place in the instructions that appears to relate to the current question is at the code table on page 17.  For code "G" in box 7, it reads,

"Use Code G for a direct rollover from[emphasis mine] a qualified plan, a section 403(b) plan, or a governmental section 457(b) plan to an eligible retirement plan (another qualified plan, a section 403(b) plan, a governmental section 457(b) plan, or an IRA). See Direct Rollovers, earlier. Also use Code G for a direct payment from an IRA to an accepting employer plan[emphasis mine], and for IRRs that are direct rollovers".

So if the 457 is an employer plan (if the government is your employer?), then this text is the only text that I have found that justifies a 1099-R with a code of G and the phrase "direct rollover". Are there other places I could look to read up on this?

[dmertz]

The section of Tax Topic 413 you are looking at is titled "IRA-to-IRA Rollover Limitation" and applies only to movement of funds from traditional IRA to traditional IRA and Roth IRA to Roth IRA.  IRS Revenue Ruling 78-406 provides the basis for the term "trustee-to-trustee transfer." 

Movement of funds from an IRA to a 401(k) , 403(b) or 457(b) is relatively uncommon compared to movement of funds in the other direction, so it's not surprising that references mostly mention rollovers from employer plans.  Yes, a 457(b) is an employer plan.

The difference between IRAs and employer plans that leads to this distinction is that an employer plan is self-contained and independent of other employer plans and IRAs, while, unlike employer plans, multiple IRA's of an participant are treated as a single account for most purposes.  Since the IRAs are treated as a single account, transferring funds from one IRA to another with no payment made to any entity other than the receiving IRA is treated the same as an investment change within a particular IRA account.

You can experiment with the Interactive Tax Assistant provided by the IRS:

https://www.irs.gov/help/ita/do-i-need-to-report-the-transfer-or-rollover-of-an-ira-or-retirement-pl...

[BMcCalpin]

"Since the IRAs are treated as a single account, transferring funds from one IRA to another with no payment made to any entity other than the receiving IRA is treated the same as an investment change within a particular IRA account." This now makes sense. Odd that I had never seen such a simple explanation before - thanks!

And that ITA is valuable...