Retirement plan

[Bandlreidcoxnet]

In Sep 2019, I took a distribution from a Annuity for $32,000,00. In Feb, 2020, I deposited it with another $20,000.00 into another Retirement Account.

The  1099R has Distribution Code 7D  in block 7. 

Can I use the code 7G in the following block as a rollover? 

[GiseleD · Accepted solution]

No. 7G is the code for a direct rollover. This is not a direct rollover. 7D is the correct code based on what you described. Based on what you have described, you may be taxed on this because you did not roll it over within 60 days. Below is some more information from IRS.gov:

How do I complete a rollover?

1. Direct rollover – If you’re getting a distribution from a retirement plan, you can ask your plan administrator to make the payment directly to another retirement plan or to an IRA. Contact your plan administrator for instructions. The administrator may issue your distribution in the form of a check made payable to your new account. No taxes will be withheld from your transfer amount.
    
2. Trustee-to-trustee transfer – If you’re getting a distribution from an IRA, you can ask the financial institution holding your IRA to make the payment directly from your IRA to another IRA or to a retirement plan. No taxes will be withheld from your transfer amount.
    
3. 60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld from a distribution from a retirement plan (see below), so you’ll have to use other funds to roll over the full amount of the distribution.

When should I roll over?

You have 60 days from the date you receive an IRA or retirement plan distribution to roll it over to another plan or IRA. The IRS may waive the 60-day rollover requirement in certain situations if you missed the deadline because of circumstances beyond your control.

[dmertz · Accepted solution]

A distribution coded 7D indicates a distribution from a nonqualified annuity or insurance policy.  This distribution was not eligible for a rollover of any kind, in particular not to a qualified retirement account like an IRA or a 401(k), so what you did was not a rollover.  Whatever you did with the proceeds of this distribution was a transaction entirely independent of the distribution.

The taxable amount of the distribution should be present in box 2a of this Form 1099-R and is the amount that must be included in your Adjusted Gross Income.

If your intent was to move this nonqualified annuity or insurance policy to another, it had to be done explicitly by what is called a Section 1035 exchange.  Section 1035 is the section of the tax code that allows a nonqualified annuity or insurance policy to be transferred without any tax consequences.

[Bandlreidcoxnet]

Thank you for the 1035 information. I will do that next time. Dumb me. I get to pay for money I never used but should have. I know better now because of you and other members of the community, Thanks.

[dmertz]

It's not necessarily all that terrible.  Assuming that the new account is another nonqualified annuity, it just means that you pay taxes on the gains in the original annuity now instead of later.  Your investment in the new contract is the entire amount paid for the new contract, not the amount paid for the old contract.