topic RMD reversal using 'transfer-in-kind' in Retirement tax questions

RMD reversal using 'transfer-in-kind'

harveyak — Fri, 29 Jan 2021 19:26:16 GMT

I made my RMD withdrawal on 2/14/2020 and did a 'transfer-in-kind' of mutual fund shares with a value of $40,000 from my IRA to my trading account. When I found out that RMDs were not required for 2020, I asked my brokerage firm to do a 'transfer-in-kind' of the same number of shares of the mutual fund from my trading account back to my IRA. It was done on 4/13/2020. The dollar value of this transfer was $31,263.96 due to the share price being lower. The 1099-R I received shows $40,000 withdrawn from the IRA and the 5498 for my IRA shows a deposit of $31,263.96. On the surface it appears that I have a net withdrawal of $8,736.04 which is taxable. The rep who I spoke with when I did the second transfer on 4/13 told me 'people do this all the time' and I would just have to include a note when I file my taxes. WHAT DO I DO IN TURBO TAX? Will I have to pay taxes on the $8,736.04?

Re: RMD reversal using 'transfer-in-kind'

dmertz — Fri, 29 Jan 2021 19:32:31 GMT

In TurboTax simply indicate that the entire distribution was rolled over. The rep is correct that you should include statement explaining why the rollover contribution amount on the Form 5498 does not agree with the amount claimed as rolled over. TurboTax does not have a provision for doing this by e-filing, so you'll need to print and mail your tax return to include your separately prepared statement.

Be sure to tell TurboTax that none of the distribution was RMD. If you already told TurboTax that some amount of this distribution was RMD, delete and reenter the Form 1099-R.

Re: RMD reversal using 'transfer-in-kind'

harveyak — Fri, 29 Jan 2021 19:45:38 GMT

After I made the transfer on 4/13, I did a Roth conversion from my IRA to my Roth IRA for $76,000. So the 1099-R I received is for $116,000. This entire distribution was not rolled over. Should I enter 2 1099's in TurboTax or only one?

Re: RMD reversal using 'transfer-in-kind'

dmertz — Fri, 29 Jan 2021 20:01:43 GMT

You'll need to split the original Form 1099-R into two, one for the portion rolled back to the traditional IRA and the other for the portion converted to Roth. TurboTax is unable to deal with a single Form 1099-R that reports both an amount rolled over and an amount converted to Roth.

Re: RMD reversal using 'transfer-in-kind'

harveyak — Mon, 01 Feb 2021 15:41:19 GMT

I received one 1099 with the total of the RMD which was reversed and the Roth conversion. I can't say the whole amount was reversed. Can I enter 2 1099s in turbotax if I only received one?

Re: RMD reversal using 'transfer-in-kind'

dmertz — Mon, 01 Feb 2021 15:48:59 GMT

The only way that you can report this using TurboTax is to enter 2 Forms 1099-R in place of the one that you received. Since you'll need to mail your printed tax return to be able to include the explanation statement regarding the in-kind distribution and rollover, the IRS will be unaware that you had to split the original Form 1099-R to make the correct entries in TurboTax. The IRS will only see the correct reporting on the tax return.