Transfer an IRA to another IRA. What reporting is needed

[dmertz · Accepted solution]

If your IRA was moved by trustee-to-trustee transfer, you have nothing to report.  A trustee-to-trustee transfer of an IRA is neither a distribution nor a rollover, so it is not reportable.  Only if a distribution was made to you that you subsequently rolled over within 60 days would you receive a Form 1099-R that must be entered into TurboTax and reported in the follow-up questions as having been rolled over.

[Marketstar]

You should receive a 1099-R for this transaction to be entered in the following area:

To enter pension and annuity Payments (1099-R)

• Click on Federal Taxes (Personal using Home and Business)
• Click on Wages and Income (Personal Income using Home and Business)
• Click on I'll choose what I work on (if shown)
• Scroll down to Retirement Plans and Social Security
• On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button

[Marketstar]

However, you may receive 1 099-R with a Code G which would indicate a trustee to trustee transfer. If you receive one, you should report it.

[dmertz]

No, code G is only for a direct rollover to or from a qualified retirement plan, not for a trustee-to-trustee transfer to move an IRA.  If a Form 1099-R is issued for an IRA trustee-to-trustee transfer, it is issued in error and a request should be made for a corrected code G Form 1099-R showing that no distribution took place.

(Some people mistakenly believe that their qualified retirement plan is an IRA when it's not.  The assumption here is that this is indeed a trustee-to-trustee transfer to move an IRA.  If the original account was in a qualified retirement plan and the code G Form 1099-R is correct, yes, it must be entered.)

[Marketstar]

I don't disagree with you, but I once made a trustee to trustee transfer from one IRA to another, received a 1099-R coded G, entered it on my return, and still got a letter from the IRS demanding that I pay tax on the income.

[dmertz]

Some custodians are less than fully competent.  My position is that the custodians should be made to correct their errors.  Because of the the IRS's recent increase in the scrutiny of retirement-account transactions, an inappropriately issued Form 1099-R can potentially have undesirable consequences.  Since a code G Form 1099-R with the IRA/SEP/SIMPLE box marked implies a rollover to a qualified retirement plan and because basis in nondeductible traditional IRA contributions is not permitted to be rolled over to a qualified plan, it's possible that the inappropriate code G Form 1099-R indicates an impermissible rollover which didn't really happen.

[Marketstar]

Your insights are appreciated, thank you.