1099R - How to show the funds were not distributed...

[OLIVERBECKETT1]

I received a 1099R which shows a distribution for my father's IRA which I inherited.  It shows a gross distribution, taxable amount, the taxable amount not determined is checked, the total distribution is checked, distribution code - 4(death) and IRA/SEP/Simple is checked.  This was a trustee to trustee transfer from my father's IRA to my inherited IRA so I don't think I should have even received the 1099.

The PAYER refuses to correct the 1099R.  How do I represent the transfer correctly in  TurboTax?

[MinhT1]

The trustee-trustee transfer of your father's IRA to your inherited IRA is technically a rollover.

You can indicate while entering the form 1099-R that you rolled over the total amount to an IRA and the transfer is not taxable.

Enter your form 1099-R by following these steps:

1. In TurboTax, open your tax return
2. Click on Federal in the left-hand column, then on Wages & Income on top of the screen
3. Scroll down and locate the section Retirement Plans and Social Security and click on Show more
4. Click Start next to IRAs, 401(k), Pension Plan Withdrawals (1099-R).
5. Enter your form 1099-R and follow the interview
6. When you arrive to the page Tell us if you moved the money through a rollover or conversion, click on the radio button I rolled over some or all of it to an IRA or other retirement account within the time limits (normally 60 days)

[dmertz · Accepted solution]

A trustee-to-trustee transfer is not a distribution and not a rollover.  No Form 1099-R is to be issued for a trustee-to-trustee transfer.  It's extremely common for bank local branch employees who are usually poorly traind with regard to IRAs to fill out their forms incorrectly, marking the movement of the funds out of the original IRA as a distribution instead of as a transfer.  Assuming the funds were indeed paid directly to the new inherited IRA without any distribution being paid to you, you must contact the original IRA custodian to get the Form 1099-R corrected to show that $0 was distributed.

TurboTax knows that a non-spouse beneficiary is not permitted to roll over a code-4 distribution, so TurboTax will not allow such a distribution to be reported as rolled over.  If the IRA custodian inexplicably refuses to make the correction you'll need to submit a substitute Form 1099-R (Form 4852) showing that $0 was distributed and explaining why the original Form 1099-R is incorrect.

Of course if there was a distribution paid to you personally (which does not seem to be the case), putting the funds back into an inherited IRA was not permitted and would constitute an excess contribution subject to penalty.

[OLIVERBECKETT1]

Thanks for your reply.  Your answer was spot on.  The bank definitely did not understand how to fill out the forms properly.  The bank rejected the idea of issuing a corrected 1099R and instead wanted me to wait until May to receive form 5498 for the inherited IRA to prove the transfer.  That's a little too late, so I went ahead and completed Form 4852.  

[dmertz]

In fact, for a proper transfer there should be no Form 5498 because there is no reportable rollover.  A Form 5498 showing a rollover contribution would actually be bad because it would substantiate that in impermissible deposit into the new inherited IRA had occurred.

If you haven't gotten beyond the local bank personnel yet, I suggest getting this escalated to their IRA department and even to bank management if possible.  Without resolution by the bank, your only option is to submit a substitute Form 1099-R (Form 4852).  To substantiate your claim that the distribution was not paid to you, it would be good to have documentation showing that the payee on the payment from the old IRA was the new IRA account (or at least the new IRA's custodian for your benefit), not you personally.