Can Fidelity issue a Corrected 1099-R due to the incorrect 1099-R they sent to the IRS? Our AGI will go up & SS down. What to do? Fidelity does not answer their phones?

[Trabia78]

What should we do?  Fidelity does not answer their phones.

[macuser_22]

Exactly what is wrong with it?

[dmertz]

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.

[Trabia78]

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

[ToddL99]

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:

[Trabia78]

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.

[dmertz]

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.

[Trabia78]

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

[dmertz]

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.

[ToddL99]

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:

[Trabia78]

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.

[fanfare]

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.

[dmertz]

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.

[fanfare]

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.

[dmertz]

Code 7 must be used.  A code-G Form 1099-R is not permitted to show tax withholding.