Rollover IRA

[Misslee78653]

I am getting my taxes done from 2021. This is the 2nd amendment to correct the 1st amendment that I'm pretty sure was not done correctly. 

I resigned from my job in August 2021. I rolled over almost 80k and withdrew 40k after it was rolled over. While doing my taxes, it is showing the 80k + 40k, so it looks like I had 120k in retirement. I keep telling the accountant that it is incorrect and 40k should be taken from the 80k, but he showed me the form preview where only the taxable amount is 40k. I still don't feel comfortable submitting it with it showing 120k. It is also showing 40k in 4a and 4b and I researched that 4a should be blank. Can anyone explain this to me? 

[rjs]

If you're not comfortable with what the accountant is doing, go to a different tax professional. (Not all accountants are tax experts.) Bring copies of your original tax return, the first amended return, your W-2, and any 1099-R forms or other tax forms that you received.

I'm not sure we can help you here. There is a lot of information missing, and we can't see your tax returns. But here are some questions that might help to clarify the situation.

"This is the 2nd amendment to correct the 1st amendment that I'm pretty sure was not done correctly."

Why did you file the first amended return? What was wrong with the original tax return?

Has the IRS completed processing of the first amended return, and sent you a notice that it was complete?

"I rolled over almost 80k"

Rolled over from what to what? From a 401(k) plan to a traditional IRA, or some other types of accounts? How many 1099-R forms did you receive, and from which accounts? On each 1099-R, what are the amounts in boxes 1 and 2a, and what is the distribution code in box 7? Is the IRA/SEP/SIMPLE box checked?

"it is showing the 80k + 40k"

"with it showing 120k"

What is "it" that shows $120K? The original tax return, the first amended return, the second amended return, or something else? What form and line number shows $120K?

"he showed me the form preview where only the taxable amount is 40k."

What form and line number?

"It is also showing 40k in 4a and 4b and I researched that 4a should be blank."

Again, what is "it"? (I assume it's a Form 1040, but is it the original one that you filed, or a revised Form 1040 that reflects one or both of the amendments?) You are only giving rounded or approximate numbers. Are the amounts on Form 1040 lines 4a and 4b exactly the same? What are the exact amounts? They should not be the same, but I don't think that that in itself is a serious problem. If lines 4a and 4b are not exactly the same, ask the accountant to explain the difference.

[NCperson]

hard to follow with missing information

however, what truly matters is what is listed on 4b - that is what is taxable.  sounds like that should be $40k

what is in 4a is simply the gross amount received.  it is not necessarily all taxable; to me, whether box 4a shows $80,000 or $120,000 doesn't matter; again, what is important is line 4b only shows $40,000 - because that is what the tax is calculated on.  

if the acountant is using software from any of the major players, then assume it is correct - these firms have spent millions and millions of dollars ensuring the tax returns are calculated and presented correctly.  Their repulations depend on  it. 

[Misslee78653]

Thanks for your reply! I tried to ask a detailed question by giving the most concise info, but let me provide more details. 

I worked in education and had a 403b that I rolled over to a Rollover IRA account with Charles Schwab. After rolling it over, I withdrew about $40,000 and left the other half in the account. I also started a business in 2021 and did contract work, so I wanted to make sure I went to a professional. 

A friend of mine has a tax prep company and after she did my taxes, I owed about $6,000. I expected to owe money due to the distribution and 1099 income. My cousin said he had someone that does his taxes each year and he usually breaks even with his business or gets a refund, so I decided to go to him.  He did my amended return and I was now due to receive a return of $9,000. When I mentioned it to someone, they said that I should get someone else to look at it. 

At this point, the amended return has been mailed off, but not processed. When it was processed in Feb of this year, I was sent a check for the difference of the 2 returns (that I haven't cashed). I did a consultation with an accountant after submitting the amendment last July and he mentioned that my withdrawal/distribution was input twice. 

I am really just trying to get my 2021 taxes completed and corrected in order to file my 2022 taxes. All of this is new to me and is stressing me out. 

School district 1099-R 

Box 1: $80,000

Box 2a: blank

Code: G

no boxes checked

Charles Schwab 1099-R 

Box 1: $40,000

Box 2a: $40,000

Code: 1

the box is checked for IRA/SEP/SIMPLE

While we were going through the tax forms together and inputting the information, it showed an amount of $120,000, but he told me that only the amount withdrawn would be taxed. On the completed 1040 tax form, Boxes 4a and 4b have $40,000 and nothing in 5b. It does not show the $120,000 on this form, only where we are submitting the information. 

All of this information is from the information input today, on the 3rd attempt at completing the taxes to correct the amended return. 

On the 1st amended return in July 2022, my distribution is included with the amount in Box 12a as a deduction. This is why I wanted someone else to look at it. I really feel like I should have left the initial return alone. 

I think I answered everything. My main concern is when inputting the information, it looks as if I rolled over $120,000, so to me the $40,000 distribution was counted twice. However, I could be stressing for no reason. This is the first time they have included me in the process. The other 2 times, I sent my documents and they sent everything back to me completed. 

[VolvoGirl]

Right.  You got 2 1099R.  The total is 120,000 in box 1.  But the rollover is code G for direct transfer and is not taxable.  Don't worry about that one.  It should show up on 1040 line 5a and zero taxable amount on 5b with the word Rollover by 5b.  Make sure it's on line 5a.  

Line 4 is for the IRA withdrawal.  So 40,000 line 4b taxable is right.  

If you are looking at a summary screen or review screen those show the full amount as income and lump a lot of stuff together. You need to check the actual 1040 form and make sure it's right.

[Critter-3]

Ok  ... you have 2 1099-R forms that will be reported on the 1040 on lines 4 & 5 ... taxes on the 40K will be regular tax + 10% penalty if you are under the age of 59.5.

Review the 1040X carefully ...  

Look at the form 1040X …

Column A should have the figures from the original return, Column C the corrected figures and Column B the differences between the other 2 which needs an explanation on page 2 of the form 1040X.

If you completed it correctly you will see an entry on either line 16 OR 18:

On line 16 should be the amount you paid with your original return. If you paid nothing already then this line should be zero.

On line 18 should be the amount of your original refund you received.  If you have not received your refund yet then you need to wait for it.  If the refund changes from what you expected then this line must reflect that change.

Then you will see your extra refund on line 22 OR  the new balance due you need to pay on line 20.

[rjs]

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@Misslee78653 wrote:

A friend of mine has a tax prep company and after she did my taxes, I owed about $6,000. I expected to owe money due to the distribution and 1099 income. My cousin said he had someone that does his taxes each year and he usually breaks even with his business or gets a refund, so I decided to go to him.  He did my amended return and I was now due to receive a return of $9,000.

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The skill of the tax preparer is not what gets you a refund or makes you owe. It depends entirely on your tax situation. If two preparers get significantly different results, at least one of them either is doing something wrong or is cheating. Two honest and knowledgeable preparers should both get the same results.

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@Misslee78653 wrote:

At this point, the amended return has been mailed off, but not processed. When it was processed in Feb of this year, I was sent a check for the difference of the 2 returns (that I haven't cashed). I did a consultation with an accountant after submitting the amendment last July and he mentioned that my withdrawal/distribution was input twice. 

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Huh? It's "not processed" but it "was processed"? Please clarify the status of the amended return. Or are you talking about two different amended returns? If you have an amended return that has been mailed but has not been fully processed by the IRS, do not submit another amended return until the first one has been completely processed.

[VolvoGirl]

What was changed on the amended return to give you such a big refund?

[Misslee78653]

It should've read, "At that point". The initial and 1st amendment have been processed. 

[Misslee78653]

@VolvoGirl He added the $40,000 into the deductions

[NCperson]

@Misslee78653 on what specific line item was the $40,000 deduction added? what was its intent? 

[rjs]

@NCperson  Note:

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@Misslee78653 wrote:

On the 1st amended return in July 2022, my distribution is included with the amount in Box 12a as a deduction.

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@Misslee78653 

You can't do that. Did you use itemized deductions (Schedule A) or the standard deduction? If you used itemized deductions, where on Schedule A is the $40,000?

Was it your cousin's tax person who added the $40,000 to the deductions on 1040 line 12a? If so, don't go back to him. Maybe your friend who has the tax prep company can straighten this out for you. You will probably end up paying back the additional refund from the first amended return.

You still haven't said what was wrong on the original tax return that made you amend it. Was it just that your cousin's tax person said you could get a bigger refund? What was on 1040 lines 4a, 4b, 5a, 5b, and 12a on your original return, before it was amended?

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@Misslee78653 wrote:

I am really just trying to get my 2021 taxes completed and corrected in order to file my 2022 taxes.

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You can probably go ahead and file your 2022 tax return without waiting to get 2021 straightened out. The only reason to wait would be if there is some sort of carryover from 2021 that might be affected by the second amended return, such as a capital loss carryover or a charitable contribution carryover.

[Misslee78653]

@rjs Yes, I understand now that the added deduction amount is the issue. I will not be going back to them. 

Nothing was wrong with the initial return. I went to my cousin's tax preparer because I wanted to make sure I received all deductions before paying out the money due.