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New Member

How do I avoid paying a penalty on an $185,000 Roth IRA distribution we received a 1099-R for. It was a short term loan to our son and was paid back in less than 60 days

We were told by Fidelity that we could withdraw money from our Roth IRA for a short term loan for our son as long as it was deposited within 60 days back into the account.  We did that.  We received a 1099-R for $185,000 today.  My husband is 66.  It is listed under Gross Distribution.

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Level 15

How do I avoid paying a penalty on an $185,000 Roth IRA distribution we received a 1099-R for. It was a short term loan to our son and was paid back in less than 60 days

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR  Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

If this was a rollover or conversion, answer the question that you moved the money to another retirement account (can be the same account). The screen will open up with choices of where it was moved.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

It will show as income on the summary screen which shows gross income, not taxable income.

The income will be reported on line 15a on the 1040 form with the word “ROLLOVER” next to it if it was a rollover.

The taxable amount will go on line 15b In the case of a rollover, that amount will be zero.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

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5 Replies
Highlighted
Level 15

How do I avoid paying a penalty on an $185,000 Roth IRA distribution we received a 1099-R for. It was a short term loan to our son and was paid back in less than 60 days

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR  Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

If this was a rollover or conversion, answer the question that you moved the money to another retirement account (can be the same account). The screen will open up with choices of where it was moved.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

It will show as income on the summary screen which shows gross income, not taxable income.

The income will be reported on line 15a on the 1040 form with the word “ROLLOVER” next to it if it was a rollover.

The taxable amount will go on line 15b In the case of a rollover, that amount will be zero.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

Highlighted
Level 15

How do I avoid paying a penalty on an $185,000 Roth IRA distribution we received a 1099-R for. It was a short term loan to our son and was paid back in less than 60 days

Note: Only one rollover can be done in a 1 year period.  If you had any IRA  rollover in the preceding year then this rollover will be disallowed.   You cannot have another rollover for a year after the deposit date of this rollover.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Highlighted
New Member

How do I avoid paying a penalty on an $185,000 Roth IRA distribution we received a 1099-R for. It was a short term loan to our son and was paid back in less than 60 days

Fidelity called it a 60 day rollover. So the rollover wouldn’t have any tax consequences?
Highlighted
Level 15

How do I avoid paying a penalty on an $185,000 Roth IRA distribution we received a 1099-R for. It was a short term loan to our son and was paid back in less than 60 days

If the money is rolled back within 60 days of the date of distribution there are no tax consequences.  The 60 days is strict - miss it by one day and the whole amount becomes taxable and cannot be returned.  IRA's are not intended for making loans.   The purpose of rollovers is to manage accounts and move money, hence the 60 day time limit to discourage short term loans.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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New Member

How do I avoid paying a penalty on an $185,000 Roth IRA distribution we received a 1099-R for. It was a short term loan to our son and was paid back in less than 60 days

Thank you! The loan was an emergency so nothing we have ever done before. I’m relieved and appreciate the help