In almost all cases were one believes that a Form 1099-R is incorrect, particularly ones from a large financial institution, the form is correct and getting correct tax treatment is a matter of entering it appropriately into TurboTax. Please explain the circumstances.
Fidelity Investments refuses to issue a Corrected 1099-R. In Box 7, they put the number 7 which means that we took out a distribution. They also paid the taxes. That was wrong. They should have entered the letter "G" which means that we rolled the money over to an IRA. I don't know what to do. Can you help? Thank you. Donna
Distribution Code G would only apply if this were a direct rollover - Fidelity moved the funds from a one retirement account registered to you directly to another retirement account registered to you.
If Fidelity distributed the funds directly to you and you moved them into another IRA account (even if held by Fidelity) then Distribution Code 7 was correct.
The 1099-R interview for the 1099-R, asks "What did you do with these funds?" If you answer that "you moved the funds to another retirement account", you won't be taxed on the rollover.
See the following screenshot:
This is our 401K situation:
1. On March 27, 2020, the IRS ruled that, due to the pandemic, the IRS is not requiring a minimum distribution from an IRA. The IRS gives a taxpayer 60 days within which to rollover 401K money to an IRA.
2. On June 3, 2020, we took out money from our 401K. Fidelity took 20% out for taxes and paid it.
3. On June 9, 2020, we called Fidelity and told them to cancel the take out money. We had Fidelity put the money into an IRA. That was well within the 60 day period within which we could rollover the money into an IRA.
4. The IRA is sitting in our joint account at Fidelity, On June 11, 2020, we established our IRA.
5. Because the 1099-R shows the number 7 in Box 7, which we do not want. TurboTax will significantly increase our AGI and Social Security will reduce our monthly checks.
6. We live totally on social security.
7. We asked Fidelity to correct the error and issue us a CORRECTED 1099-R.
8. When I was preparing our taxes, I learned from TurboTax that on March 27, 2020 that the IRS ruled on the distribution issue due to the pandemic. In June, Fidelity never informed us so we could have a choice.
9. It was a direct rollover because we were within the 60-day period within which to rollover from a 401K to the IRA. One week lapsed.
I agree, it appears that there is nothing wrong with this Form 1099-R. In this case the reporting indicates that the distribution was paid to you, not directly to a different retirement account. As a result, a minimum of 20% was required to have been withheld for federal taxes and is shown in box 4 of the Form 1099-R.
Enter the Form 1099-R exactly as received, indicate that you moved the money to another retirement account, then indicate the amount of the gross that was rolled over. Generally the amount rolled over would be the gross amount shown in box 1 minus the federal and state tax withholding unless you substituted other funds to include in the rollover some of all of the amount withheld for taxes. TurboTax will exclude the amount rolled over from the taxable amount reported on Form 1040 line 4b and will include the word ROLLOVER next to this line. TurboTax will also credit the federal and state tax withholding on your federal and state tax returns, respectively.
Hi: Your response is not correct. The IRS has ruled in two areas this year: 1. On March 27, 2021, the IRS ruled that due to the pandemic an RMD is not required for 2020. 2. And the IRS ruled that an individual has 60-days within which to roll over a 401K into an IRA. We rolled our 401K minus taxes withheld by Fidelity 7 days after we took out the money from our 401K Plan. So I believe that letter "G" + checking the IRA box in the 1099-R is the correct entry. But Fidelity (a horrible brokerage firm) refuses to provide us with a Corrected 1099-R. What do you think? Best regards. Donna
Code G would have been correct if the funds were paid directly to the receiving retirement account by Fidelity, but that is not the case here. The fact that the distribution was paid to you and that taxes were withheld, shown in box 4 of this Form 1099-R, indicates that this was an indirect rollover, not a direct rollover that qualifies for the use of code G. The Form 1099-R provided by Fidelity is correct as is.
In 2020 TurboTax, delete the Form 1099-R, enter it exactly as received, indicate that none of it was RMD, then indicate that the money was moved to another retirement account or returned to the same account and that entire amount was rolled over. doing so will cause TurboTax to exclude the entire amount from Form 1040 line 4b.
The 1099-R you got from Fidelity was correct. Distribution Code G would only apply if this were a direct rollover - Fidelity moved the funds from a one retirement account registered to you directly to another retirement account registered to you (at Fidelity or another IRA fiduciary like Vanguard).
Since Fidelity distributed the funds directly to you and you moved them into another IRA account (even if held by Fidelity) then Distribution Code 7 was correct.
That could not have been the case since they withheld taxes from the distribution they made to you.
The 1099-R interview for the 1099-R, asks "What did you do with these funds?" If you answer that "you moved the funds to another retirement account", you won't be taxed on the rollover.
See the following screenshot:
But the IRS ruled that we all have 60 days within which to rollover the money to an IRA. So why cannot we use the code G in the 1099-R? I don't understand this at all. We rolled over the money in 7 days.
Sometimes you enter a different code to trick TurboTax.
In this case, if you use "G" you should end up in the same place.
You have a taxable distribution, namely the tax that they withheld for you. That will end up on Line 5b.
Selecting code G instead of code 7 will cause problems. The Form 1099-R transmitted electronically with the e-filed tax return will disagree with the correct Form 1099-R sent to the IRS by Fidelity.
If you use Code 7 but enter the Word "Rollover" on Form 1040,
that also will disagree with the Form 1099-R sent to the IRS by Fidelity.
Yet the IRS takes your word for it.
Code 7 must be used. A code-G Form 1099-R is not permitted to show tax withholding.
I really appreciate all of your responses. According to page 2 of the 1099-R, the Code G states "Direct rollover of a distribution to.......an IRA. The IRS gives us 60 days within which to rollover to an IRA. We rolled over the 401K money to an IRA within seven (7) days. Also, Fidelity never properly advised us regarding the 3-27-2020 ruling that due to the pandemic, we are not required to take a distribution. We just took the money out and within 7 days, we rolled it over. We learned about the 3-27-2020 pandemic ruling last week when I started to prepare taxes via TurboTax. The problem is that our AGI will go up and our social security checks will go down. We live in $64,000 per year before taxes. I do not undertand these reponses.
@fanfare wrote:
If you use Code 7 but enter the Word "Rollover" on Form 1040,
that also will disagree with the Form 1099-R sent to the IRS by Fidelity.
Yet the IRS takes your word for it.
A code 7 rollover does not disagree with the 1099-R at all since a code 7 1099-R is permitted to be rolled over and the word rollover next to the 1040 line 4 or line 5 is required by the IRS. That is not disagreeing it is complying.
If there is box 4 withholding the 1099-R cannot be code G and the TurboTax form is sent to the IRS that will disagree with the form received from the financial institution guaranteeing a IRS audit letter.
Code G in Page 2 of the 1099-R document does not represent tax withholding. It represents the rollover from a 401K to an IRA within the 60-day limit presribed by the IRS. Donna
@Trabia78 wrote:
I really appreciate all of your responses. According to page 2 of the 1099-R, the Code G states "Direct rollover of a distribution to.......an IRA. The IRS gives us 60 days within which to rollover to an IRA. We rolled over the 401K money to an IRA within seven (7) days. Also, Fidelity never properly advised us regarding the 3-27-2020 ruling that due to the pandemic, we are not required to take a distribution. We just took the money out and within 7 days, we rolled it over. We learned about the 3-27-2020 pandemic ruling last week when I started to prepare taxes via TurboTax. The problem is that our AGI will go up and our social security checks will go down. We live in $64,000 per year before taxes. I do not undertand these reponses.
Yours was NOT a direct rollover so code G is not proper and there can be not be 4 tax withholding with a code G.
In indirect rollover and a Code G will do the same thing if the money was rolled back. Neither one is taxable. However, a code 7 with box 4 withholding (that was also part of the distribution) means the the box 4 withholding IS a taxable distribution and must be accounted for. You cannot say that the entire box 1 amount was rolled over if part of box 1 was withheld in box 4, unless the box 4 tax was made up for with other funds at the time of the rollover - TurboTax will ask about that.
@Trabia78 regardless of the nuances, if you had withholding taken out that cannot be undone.
So please use the document you got as is.
As long as your AGI is below $200,000 after rollover your medicare won't go up.
But, if it does, it will go back down the next year.
I am so sorry. I don't think that you undestand what I am saying. I am specifically talking about Box 7 titled "Distribution Codes IRA/SEP Box. Box 7 should be Code G and the IRA box should be checked. We took money out of our 401K and we rolled over that money within 7 days to the IRA. The IRS says we have 60 days to rollover the money to an IRA. We rolled it over in 7 days.
Thank you. If we do not use Code G and check off the IRA box in the 1099-R, which did in fact occur, our AGI will be $212,000 and our SS checks will go down. We live only on $64,000 per year before deductions.
We really appreciate all of your help. What does it mean that the IRS gives us 60 days within which to rollover money from a 401K to an IRA in order to get a Code G in Item 7 of the 1099-R?
is that after you told TurboTax how much money you put back into the IRA ??
You must press CONTINUE after entering the 1099-R document.