HELP!! Withdrawal of Retirement Funds

No, not twice.  You will get a 1099R for the retirement withdrawal.  It will be taxable.   Then if you put it in a personal investment account and then took it out you may have to report a Sale from the investment.  

You get a 1099B for sales.  You only pay tax on any Gain you made (Sales price - what you put in).  If you got less than you invested you can deduct a Loss.

Did you report the 1099R on your tax return?  It should show up on 2018 1040 line 4b as taxable.  Or didn't you report the 1099B?

If you took a distribution for a retirement account then it was probably a Traditional or Roth IRA and the financial institution would have issued a 1099-R for the year that the distribution took place.  You were required to report that 1099-R on your tax return.   It a Traditional IRA then probably the 1099-R box 1 amount would be taxable income, of a Roth IRA then it may or may not be taxable depending on your circumstances.    Either way failure to report the 1099-R at all will make the IRS assume that it was all taxable and they will bill you.

What does the letter say?  What tax year is this for?

Thank you so much!!  I did get 1099-R from both bank and "retirement".  I only filed the one from the bank. :(  I'm afraid I'm going to owe a lot + penalty. 

Thanks for the reply.  It was for 2017.

Oh, was the investment at the bank into another IRA account?  You still needed to report the first 1099R and say you rolled it over to the new IRA account.   Then the first 1099R won't be taxable.

I think I had a 401k in retirement account and IRA in the bank.  How much does IRS penalize?  Is it the same amount as how much I'd owe?

---

@leneanne86 wrote:

I think I had a 401k in retirement account and IRA in the bank.  How much does IRS penalize?  Is it the same amount as how much I'd owe?

---

A 401(k) is an employer sponsored retirement account.    That would not be in a bank unless you were the employer (self-employed 401(k) ), otherwise it would be distributed by the 401K) plan trustee.   If it was a 401(k) that yiu rolled into a IRA then you should have reported that distribution as a 401(k) to IRA rollover and there would be no tax or penalty at all.  That 1099-R should have had a code "G" in box 7.

The IRS will add late charges and interest to late payments of tax.  They will bill you separately for those.

The retirement funds I took out was from my employer.  

Thank you so much for all your help!  Will IRS accept installment payments?   I am just so worried.

Call the IRS on the number for more information that should be in the letter you received and tell them what happened.   Only the distribution from the IRA should be taxable.

Based on what you said I don't think you really owe any more tax.  You probably need to amend the return to add the 401K 1099R and say you rolled it over to the IRA.  Unless you put it into a ROTH IRA at the bank.  What code is in box 7 on both the 1099R you got?

Did you pay tax on the bank IRA withdrawal?  Is there a taxable amount on 1040 line 15b for it? 

You might owe a penalty for taking it out early or if you are under 59 1/2.

I understood the original question to say that the OP tried to simply cash the check form the 401(k) plan but the bank insisted that it be put into another account (as they should for a check from a 401(k) to a rollover IRA).  That distribution should have been reported as a non-taxable rollover with a 1099-R that probably has a code G in box 7.

The OP then immediately cashed out the IRA that probably generated a 1099-R with a code 1 in box 7 (if under age 59 1/2) or a code 7 of over age 59 1/2.   That distribution would be fully taxable plus 10% penalty if a code "1".

You sound very knowledgeable.  So here’s what happened, I took my $ out of my retirement account (from employer).  Once I received the check, the bank put it on an IRA account when all I wanted to do was to put the $ into a savings account.  I needed that $ so I took it all out of the IRA account.

 I did receive 1099-R from my retirement account and another 1099-R from the bank.  I did follow the step-by-step on filing these on turbo tax online.  I did not miss a single step at all.  I made sure I copied everything whats on that form to turbo tax return.  Now, I don’t know why IRS think I understated my taxable income line/box. 

my question is will I get taxed and penalized for both 1099-R’s when the 1099-R from the bank is the $ I received from my retirement (employer)????  I feel like am IRS is taxing me twice for the SAME $..... 😭

you won't get taxed twice...but what are the codes on each 1099 you received? (box 7)

When you enter the Form 1099-R from the original retirement account, you'll indicate to TurboTax that it was rolled over to another retirement account (the IRA), making it nontaxable.  If the code in box 7 of the Form 1099-R from the original retirement account is G (which is likely the case if the bank forced you put the money into an IRA, suggesting that the check was made payable to your IRA instead of being made payable to you personally), the code G itself indicates that the distribution was rolled over.  In this case the amount in box 2a of the Form 1099-R would be zero, indicating that the rollover is nontaxable.

If the distribution was made payable to you, the Form 1099-R from the original retirement account would instead have code 1, 2 or 7 in box 7 and would have a taxable amount in box 2a.  In this case you would have to explicitly tell TurboTax that the distribution was rolled over, making it nontaxable.

The check was made payable to me.  I then took the check to the bank and they placed it on an IRA account.  A couple weeks later I took it all out from the IRA account.  

Both 1099-R’s have 1 in box 7.

Can you please answer my questions completely so we can all give you the right answer...... great that we now know there was a ‘1’ ( you are under 59.5 years old, right?) any other codes ? Was the IRA/ Sep box checked? 

also was line 15a approximately double what was on line 15b? Sounds like it should have been - which is where the problem may lie 

Let's start over, one step at a time.

When you got the check from work they probably took withholding out of it, right? The Retirement 1099R should be on 1040 line 16. The full amount of the distribution should be on line 16a. Then line 16b will say ROLLOVER by it and the taxable amount should only be for the withholding amount from 1099R box 4 (since you didn't put the withholding into the IRA). The withholding also shows up on line 64 with any other withholding.

Then the IRA distribution will be on 1040 line 15. The full amount should be taxable on line 15b. So line 15b and 16b should equal the full gross amount of the retirement distribution (before withholding). Then the whole amount is only taxed once.

You said you only reported the 1099R from the bank IRA. You still need to add the retirement 1099R to line 16. It should only add the withholding amount as taxable to line 16b. Does the IRS say you can amend? But you will also get credit for the withholding in box 1099R.

I called turbo tax expert.  For some reason, the system didn’t report the gross amount as taxable income.  It only reported 80% of it.  I don’t know how that happened since I followed the step by step guide thoroughly.  I made sure everything I entered on turbo tax matched 1099-R forms.  I’m a lil disappointed with Turbo Tax now....

They take responsibility for any interest and penalties of it is a software issue 

the tax itself remains your responsibility 

Thanks for letting me know!  I will be speaking with the turbo rep again and see what he says about this when I mention it.  I sure hope they’d pay for the interest and penalty!

TurboTax ONLY pays interest and penalties if it was a *calculation* software error, not if it was caused by a user data input error.   The 1099-R interview has changed very little over the past several years.  The only software error that I am aware of is the unique situation of an inherited IRA with a basis and that was corrected with an update. 

From your description, if you received two 1099-R's with a code 1 in box 7 then one of them should have been issued by the 401(k) plan.   If that was placed in a bank IRA account within 60 days of the 401(k) distribution then you should have told TurboTax that this was a non-taxable rollover.   Under this circumstance you are allowed to enter a zero into box 2a (taxable amount - the TurboTax help tells you that) and indicated in the interview that the distribution was rolled into another retirement account.    That would have placed the box 1 amount on 1040 line 15a and zero taxable amount of zero on line 15b with the word "ROLLOVER" next to it.

If that is not what was on the 1040 then you made a data entry error and you did not properly report it as a non-taxable rollover.   The IRS should be able to remedy this with a phone call to the number on the letter.   They might ask you to amend that return to report it properly. This is not covered by the accuracy guarantee.

Only the distribution from the new IRA should be taxable.

And if you think you have a accuracy guarantee claim then calling will not help. The claim must be submitted on a form - see below:

https://ttlc.intuit.com/community/charges-and-fees/help/how-do-i-submit-a-claim-under-the-turbotax-100-accurate-calculation-guarantee-or-100-accurate-expert/01/26065