Bank coded my IRA transfer as distribution, not transfer. Help!

[smolinskijj]

This makes sense.  So the penalty is the "income" since the rest was rolled over.

[leeloo]

Yes, the penalty is the only income in this situation. 

[VolvoGirl]

You will also owe the 10% early withdrawal penalty on the $,1500  "distribution" you took for withholding.  The 1,500 will be added to your income and taxed and then a $150 early penalty tax .  

[smolinskijj]

Thank you.  So, to summarize (for my simplistic brain)...

• The incorrect withdrawal resulted in 10% of the IRA being witheld (1,500 from 15,000)
• If the IRA balance was kept, all of it would be considered income - a significant problem.
• But since we rolled it over (minus the 10% penalty), only the 10% penalty is considered "income" (1,500).
• The $1500 "income" will be added to our other income and taxed appropriately.
• In addition there is the "10% of the 10%" penalty, so $150.

Do I have it?

[leeloo]

Yes, good job.

[smolinskijj]

@leeloo  🤣 thank you.

[leeloo]

My pleasure.

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[smolinskijj]

@LindaS5247  @VolvoGirl 

OK, just verifying one more time.  This has been educational and I appreciate your time and attention.

Despite the ~$1,500 being sent to the IRS and indicated as taxable income, meaning I rolled over the entire IRA minus the $1,500, I should still indicate YES - I rolled over the full amount?

This is the screen I am agonizing over:

Did (wife's name) rollover the gross amount of $14,358.63 (Box 1) to another retirement account?

• Yes, Jessica rolled over $14,358.63 to another traditional IRA or retirement account (or returned it to the same account) using my own money. You previously indicated this is the answer even though the entirety minus the penalty was rolled over. This seems to put most (almost all) of the ~1500 into my refund.
• No, Jessica rolled over less than $14,358.63. This is what I originally thought I should use but you said no...? This seems to put some (not all) of the ~1500 into my refund.
• I did something else Not an option I guess.

[MinhT1]

@smolinskijj 

You should answer that she rolled over less than $14,358.63 and enter the actual amount (which is the total amount less the tax withheld).

[smolinskijj]

@MinhT1  @LindaS5247 

Thank you - now I am getting conflicting answers.  Can you clarify?

[MinhT1]

In fact, we are saying the same thing.

As your spouse only rolled over the net amount which she received (the total amount less withheld tax), only that amount should be reported and you will pay tax and the 10% penalty of the $1,500 (which is the tax withheld).

As there is already $1,500 tax withheld, overall the operation will result in a net refund for you.

[VolvoGirl]

Yes I agree.  Say no and only enter the actual amount rolled over.  Not the 1,500.  The 1,500 becomes a distribution itself.