Should rollover reduce income?

Forum|Forum|5 years ago
February 1, 2021
1 reply
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rollover amount does not show on 1040

TurboTax Deluxe Online

DawnC

Level 15

The amount you rollover should be included in income but not taxable income. The total amount will show on line 4a or 5a, but amounts that were rolled over within 60 days will not be included on lines 4b or 5b which show the taxable portion only. Go back through your 1099-R questions and be sure to answer the follow-up questions regarding any rollovers after you enter all of your 1099-Rs. If you did not roll over the entire distribution, you may be eligible to spread the tax over tax years 2020-2022 - see more below, but TurboTax is not yet updated to handle this situation, but will be soon!

If you took a distribution from a retirement account due to corona virus related issues, you will be able to waive the penalty and spread the ordinary tax over tax years 2020-2022. However, the forms have not been finalized by the IRS yet, so TurboTax has not been updated. Once the forms are final (no date determined by IRS yet), you will see the options to apply the tax relief provisions on Form 8915-E. The IRS does not start accepting returns until Feb 12th, so check back then to see what the status is.

Those who qualify as individuals directly impacted by the pandemic will be able to withdraw up to $100k from their retirement accounts without facing the 10% early withdrawal penalty. You qualify if:

You, your spouse, or your dependent are diagnosed with COVID-19
You experience adverse financial consequences because of being quarantined, furloughed, or laid off
You had work hours reduced to COVID-19
You’re unable to work due to childcare closure or hour reduction

The distribution would be taxed over 2020, 2021, and 2022. You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount within that time, you’ll be able to claim a refund on those taxes.

As things change, TurboTax is continually updated and able to handle every situation that arises to ensure your taxes are done right, so you’ll receive your maximum refund.

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BillyBoy60Author

Level 2

Covid did not figure in any of this.

As 2020 began, I started taking monthly amounts from my IRA as RMD's. In March, the IRS suspended RMD's, and since I didn't need the money, I stopped taking any more RMD. In total, gross distributions were $15,600. (Box 7 Distribution Code is 7.)

In addition, the IRS ruled that all or any part of RMD taken may be rolled over to another or the same IRA. The 60 day rule is waived, but had to be done by Aug 31, 2020.

I rolled over $8,000 by putting it back into the same IRA on June 30.

See IR-2020-127, June 23, 2020.

When I filled out the 1099 R page for this, I put in the rollover amount of $8,000. The $8,000 shows at the bottom of the page on line B2.

However, on the 1040, there is no mention of the $8,000 rollover, which should reduce the $15,600 income to $7,600. ($15,600 - $8,000 = $7,600.)

That would lower my taxable income by $8,000.

I have gone over the 1099 input pages several times, and it does not help.

Can you help?

DaveF1006

Level 15

it depends. Try these steps to see if the entry was made correctly. If not, just repost your answer in this thread to do some additional troubleshooting. Assuming you are using Turbo Tax online, perform these steps.

Log into Turbo Tax
Go to tax tools>tools>view tax summary
Now look in you left side of your screen and select
Preview my 1040
Scroll down to Boxes 4a and 4b. There should be a difference. 4a is your gross distribution and 4b is your taxable amount of your distribution. In addition, underneath 4a should say rollover. There will not be an amount listed there but this informs the IRS that the difference is because of the rollover.
NOTE: If there are no amounts listed in 4a and 4b BUT listed in 5a and 5b, then this was incorrectly reported as a pension. You will need to go back into your program and edit the 1099-R and check the box within the form stating that this is an IRA so that this distribution is handled correctly in the program.