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cindybrian
New Member

How do I report a remediation payment from a mutual fund company in 2021 that is attributed to my IRA? Can I just deposit those funds back into the IRA?

 
3 Replies
PattiF
Expert Alumni

How do I report a remediation payment from a mutual fund company in 2021 that is attributed to my IRA? Can I just deposit those funds back into the IRA?

From @dmertz:

If these were the result of mutual funds held in an IRA, ideally the checks should have been made payable to the IRA since the IRA was the owner.  However, such payments are sometimes paid to the IRA participant instead and should be deposited into the IRA as a restorative payment or a rollover depending on whether or not they are reported on Form 1099-R as a distribution.

 

If not deposited into an IRA, the funds are considered to have been distributed from the IRA that owned the mutual funds and should be reported on the tax return as such.  If a Form 1099-R was issued reporting this as a distribution, that Form 1099-R must be entered into TurboTax and you must indicate that you "did something else with the money," i.e., you did not roll it over.  If no Form 1099-R was issued, you would probably need to enter a substitute Form 1099-R (Form 4852) as if you had received a Form 1099-R reporting a regular distribution from the IRA, subject to ordinary income tax and, if you are under age 59½, to a 10% early-distribution penalty on the taxable amount.

cindybrian
New Member

How do I report a remediation payment from a mutual fund company in 2021 that is attributed to my IRA? Can I just deposit those funds back into the IRA?

Thanks for your response. The actual IRA account that I received the remediation payment is closed and a new rollover account was set up with a different institution. Can I just deposit those funds received late in 2021 into the new rollover IRA account? I never received a 1099-R for these distributed funds. Lastly if I can just deposit these funds into the new rollover IRA do I have to report anything on my Turbotax for 2021 that I have yet to file?

PattiF
Expert Alumni

How do I report a remediation payment from a mutual fund company in 2021 that is attributed to my IRA? Can I just deposit those funds back into the IRA?

You should give it to your IRA custodian to be deposited in the IRA.  It would not be a new contribution.  It would be handled the same as interest or capital gain within the IRA. Nothing needs to be reported if deposited into the IRA account.

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