HELP!! Withdrawal of Retirement Funds

[leneanne86]

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.

[NCperson]

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 

[VolvoGirl]

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.

[leneanne86]

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....

[NCperson]

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

the tax itself remains your responsibility 

[leneanne86]

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!

[macuser_22]

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.

[macuser_22]

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-1...