Problem with reporting IRA rollovers

[marquez431]

Isabella G:

Thank you so much for this advice. It worked exactly as you stated for my situation with a RMD.  I had a Qualified Distribution amount plus too much was withdrawn for my RMD and I had to rollover that overage back into the original IRA.

Your example and descriptions led me to be able to input everything I needed to complete this challenging situation!!

NLH

[Bamboo]

Thanks for letting me know and I'm glad it helped!

[CAC]

The desktop version of Turbo Tax can handle the rollovers; the online version cannot. They should both work the same way; however anyone with rollover situations should ensure he/she uses the desktop version (or another software as I did).

[ggold91364]

I read your answer to another user and I have a similar problem.  I did a Trustee-to-Trustee IRA transfer.  The 1099-r from the paying trustee incorrectly reported distribution code 7.  When I contacted them (Fidelity Investments) they claimed not to worry (and they won't fix it) because they said IRS will match the CORRECTLY completed Form 5498 from the receiving trustee and deduct it from my taxable income!  But TurboTax then won't report my tax correctly.  I'm using the 2018 H&B desktop version.  It does not have a "what did you do with the money" box that I can find.  I see only an option to CORRECT the 1099-R.  But if I do that, will I lose the ability to e-file? I have all the evidence to show it was a direct trustee-to-trustee rollover.  I actually had two of them from two different IRAs.  One from Fidelity and another from a different IRA but both use National Financial Services LLC as their agent for preparing the 1099s and they refuse to fix these

[Bamboo]

If you never received the funds then Fidelity should not have issued a 1099. One option is to report it as shown on the 1099 but indicate it was rolled over within 60 days. This gets it out of taxable income, which is what you want. A concern here might be if there is another 60 day rollover within a year; if there isn't then you shouldn't have a problem.  Don't know if you can attach a statement to the return indicating it was a trustee-to-trustee transfer?

Bottom line for me would be: 1) show the 1099 on the return so it isn't kicked out , and 2) get the money out of taxable income. I would definitely not report the income and rely on the IRS to back it out of taxable income by matching to receiving institution's 5498! 

Good luck

[CAC]

This is a tricky one. I believe you can execute unlimited direct IRA rollovers but only one indirect IRA rollover (distribution taken but rolled over within 60 days) per year. If you rolled over two IRAs you can't try to report them as indirect rollovers in order to correct the wrong distribution code (only one would be allowed). In addition, Turbo Tax has a bug that does not ask what you did with the money so you can't use it to report them. I would say your options are to try the correct 1099R box, override the code 7 with a rollover code, file manually or consult an expert. Good luck!

[CAC]

This is a tricky one. I believe you can execute unlimited direct IRA rollovers but only one indirect IRA rollover (distribution taken but rolled over within 60 days) per year. If you rolled over two IRAs you can't try to report them as indirect rollovers in order to correct the wrong distribution code (only one would be allowed). In addition, Turbo Tax has a bug that does not ask what you did with the money so you can't use it to report them. I would say your options are to try the correct 1099R box, override the code 7 with a rollover code, file manually or consult an expert. Good luck!

[ggold91364]

The better way for me to proceed, since BOTH of the transfers were Trustee-to-Trustee, is to prepare corrected 1099-R forms per the process allowed in TurboTax.  I have now done that and TurboTax no longer has a problem correctly computing the tax and there's no error indicated in the forms, so I should be able to e-file.  Of course, I also can testify that I contacted the issuer of the incorrect 1099-R forms and they refused to correct them, arguing that the IRS will match up the receiving trustee's Form 5498.  It's rather a CYA position on the part of the issuer of the 1099-R forms.  They can escape this way because there's no penalty to them other than perhaps time spent with IRS if IRS decides to audit my return and them.  

If my return gets audited and IRS requests my evidence, I will be relying on TurboTax Audit Protection, which I always purchase and they will have to deal with the IRS on my behalf.  I was hoping to avoid all this but Financial Services LLC won't budge.

[ggold91364]

I know it wasn't easy to find within TurboTax, but I want to make clear here that all of you folks who have responded should be aware that (within TurboTax Home & Business 2018 at least) if the 1099-R form is incorrect the filer can create their OWN corrected 1099-R.  There's a box to check in TurboTax to allow for that.  Then, depending upon the correction needed, the filer enters the CORRECT information into the corrected form and provides the explanation in the provided for places that come up within TurboTax.  In my case both of these were direct Trustee-to-Trustee transfers, which are NON-REPORTABLE EVENTS.  So I had to prepare my 1099-R showing that they were ROLLOVERS and within the explanation pages provided in TurboTax I explain where I obtained the numbers that I entered and the evidence I have that my request for the issuers of the incorrect 1099 Forms to fix them were denied.

Please everyone Note: You CAN fix the incorrect 1099-R within TurboTax.  Just follow the page carefully.  I'm a bit surprised I'm still getting replies suggesting all kinds of other ways to treat the correction.  Don't do that!  You won't be protected by TurboTax Audit Defense if you deviate from the procedure they have provided within the TurboTax program.

[CAC]

That's good information but wonder if the corrected 1099-R option is only available on the home and business version. Glad you got the problem resolved!

[ggold91364-2]

I can’t speak for the other TurboTax versions on this matter. However, the 1099-R (and other non-business related forms) most likely are handled similarly in all the 2018 tax year versions. There’s no reason why they’d differ in terms of compliance or remedies. So people can try it and find out.

[Lindalee0]

Fidelity reported my back door Roth as distribution code 7 because I am over 59 1/2, but the distribution was not counted as taxable income.  The taxes are corrected in the deductions section of Turbotax.  I forgot this and freaked out, so I specified in the supporting form that the money was already taxed, which is handled in the deductions section. 

[Litofeit]

I can confirm the same on the online version. It's bugged. The what did you do with it dialog never shows, which cascades to being taxed on the distribution, which cascades into not qualifying for deductions I actually qualify for including Child tax credit etc. It's broke. So, there is and downloadable version that works?  I've been beating my head against the wall for a week on this stupid thing and was looking for another solution. The user above suggested HRBLOCK.

[Litofeit]

If this works I'm literally reaching out for a big old digital hug and smooch... thanks 

[caffeyw]

I just received notice from IRS that they believe I didnt report income.  There was an indirect rollover.  I properly answered all the questions.  The printed copy of the return I have shows ROLLOVER listed on the line.  However IRS is saying they dont have any indication why the amount (reported in 15a) wasnt also included in 15b (the taxable amount) field.  All they show is the amount listed in total distribution 15a, and no amount in 15b.  

Is there a know issue with TT not sending the ROLLOVER notation?