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mike-ernst
New Member

We received a 401K distribution in 2 checks. We need to show the second amt. as taxable on line 15B of form 1040. Should I just override the form 199R Summary worksheet?

We received a distribution on a 401k in 2 checks. The 1099R shows the total amount as a rollover. Both checks were made out to the bank Mutual Fund Management, but the second check was inadvertently deposited to our saving account by us rather than to the IRA account. So we need to show the amount as taxable income on line 15B of form 1040. Since it was a mistake on our part there is no error on the 1099R. I can just override the amount on the 1099R worksheet Line 1, but is that the best way to handle this?

1 Best answer

Accepted Solutions
dmertz
Level 15

We received a 401K distribution in 2 checks. We need to show the second amt. as taxable on line 15B of form 1040. Should I just override the form 199R Summary worksheet?

By depositing the funds into a savings account, you caused this portion of your distribution which was apparently intended to be directly rolled over to another retirement account to fail to be rolled over.  If you did not complete an indirect rollover of this portion within 60 days, the distribution became a potentially taxable distribution as you suggested.

In all likelihood, the payer issued a code G From 1099-R reporting a nontaxable direct rollover.  Under the circumstances, the Form 1099-R is incorrect.  Since the payer did what you asked as far as initiating the directly rollover, there is no reason to expect them to accommodate you by issuing corrected Forms 1099-R.  Instead, you will have to create two substitute Forms 1099-R (Form 4852) to report the actual distributions and rollover that occurred.

Since two checks were issued it seems likely that some amount of the total distribution was after-tax money reported in box 5.  If that's the case, the details of the two substitute Forms 1099-R are complicated to determine.  For a single distribution split between two destinations, the law says that the first amount rolled over consist of the pre-tax portion of the distribution and only after the entire pre-tax portion is rolled over does any of the after-tax money get rolled over.  Without knowing the exact details of the original Form 1099-R, the amount that was successfully rolled over and the type of IRA account to which the successful rollover occurred, it's impossible under these circumstances to determine the actual taxable amount and the necessary details of the substitute Forms 1099-R.

Presumably the distribution came from a qualified retirement plan (the IRA/SEP/SIMPLE box not marked on the Form 1099-R), not from an IRA.  If so, these distributions are reported on Form 1040 line 16, not line 15.  Line 15 is only for distributions from IRAs.

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2 Replies
dmertz
Level 15

We received a 401K distribution in 2 checks. We need to show the second amt. as taxable on line 15B of form 1040. Should I just override the form 199R Summary worksheet?

By depositing the funds into a savings account, you caused this portion of your distribution which was apparently intended to be directly rolled over to another retirement account to fail to be rolled over.  If you did not complete an indirect rollover of this portion within 60 days, the distribution became a potentially taxable distribution as you suggested.

In all likelihood, the payer issued a code G From 1099-R reporting a nontaxable direct rollover.  Under the circumstances, the Form 1099-R is incorrect.  Since the payer did what you asked as far as initiating the directly rollover, there is no reason to expect them to accommodate you by issuing corrected Forms 1099-R.  Instead, you will have to create two substitute Forms 1099-R (Form 4852) to report the actual distributions and rollover that occurred.

Since two checks were issued it seems likely that some amount of the total distribution was after-tax money reported in box 5.  If that's the case, the details of the two substitute Forms 1099-R are complicated to determine.  For a single distribution split between two destinations, the law says that the first amount rolled over consist of the pre-tax portion of the distribution and only after the entire pre-tax portion is rolled over does any of the after-tax money get rolled over.  Without knowing the exact details of the original Form 1099-R, the amount that was successfully rolled over and the type of IRA account to which the successful rollover occurred, it's impossible under these circumstances to determine the actual taxable amount and the necessary details of the substitute Forms 1099-R.

Presumably the distribution came from a qualified retirement plan (the IRA/SEP/SIMPLE box not marked on the Form 1099-R), not from an IRA.  If so, these distributions are reported on Form 1040 line 16, not line 15.  Line 15 is only for distributions from IRAs.

CarolC
Level 6

We received a 401K distribution in 2 checks. We need to show the second amt. as taxable on line 15B of form 1040. Should I just override the form 199R Summary worksheet?

If the funds are with the same financial institution where your IRA account is held, ask the financial services company to reverse the savings account deposit and retroactively deposit the rollover into your IRA account.  If this does not work, you may be able to withdraw the funds and deposit them into the IRA, even though 60 days have passed.  If certain conditions apply, the IRS allows automatic waivers when the 60-day window is not met.  

If you would prefer to instead keep the funds in your savings account, then you need to request a Corrected 1099-R from the administrator of your 401(k) plan.  As you must enter the tax document exactly how it reads.

Read this TurboTax FAQ below to see if your situation would qualify for a waiver.  Click "See entire answer" for the full page view.

https://ttlc.intuit.com/replies/5397743

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