Pennsylvania IRA indirect rollover question

[Johnny28]

Took an IRA from one bank and 100% rolled over to another IRA, at another financial institution within a week. TT seems fine with federal side, however PA state side showing taxes owed, on money i didn't receive, even though in the section "State code" the "Rollover" option was selected. (should it be something else?)

1099R Box 7 = 1

Any suggestions would be appreciated.

John

[RobertB4444 · Accepted solution]

The Box 7 code "1" is for an early withdrawal with no exception.  Your 1099-R should have had a code "G" in box 7 and no taxable amount in box 2a.  I suggest you go back to your financial institution and request a changed 1099-R or you will have the IRS and PA asking for more info.

[Johnny28]

Thanks for reply.

Box 2A does have a taxable amount.

Since this was a indirect rollover and I personally took the check (full amount) to another institution, then redeposited. Should the new institution provide paperwork, proving the said amount was redistributed into a qualifying plan?

[Johnny28]

I will go back to administrator to resolve, thank you

[TomD8]

@Johnny28 

Did your 1099-R show any federal taxes withheld (Box 4)?  If so, you should have added an equivalent amount from outside funds to your indirect rollover.  Otherwise you were rolling over only part of the distribution, and the remainder would be taxed.

For an illustration, see How much can I rollover if taxes were withheld from my distribution? in this IRS reference:

https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-...

 

[Johnny28]

From the IRS.gov link Tom provided, here is my case:

Copied from (https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-...)

Most pre-retirement payments you receive from a retirement plan or IRA can be “rolled over” by depositing the payment in another retirement plan or IRA within 60 days. You can also have your financial institution or plan directly transfer the payment to another plan or IRA.

60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld from a distribution from a retirement plan (see below), so you’ll have to use other funds to roll over the full amount of the distribution.

According to the above information, this is not taxable, since I deposited the full amount, into another IRA, within 60 days (actually was same day)

With that said in this section, if rollover is selected PA tax is owed. However this is not taxable. How can this be corrected in TT Desktop?

[ErnieS0]

Tell TurboTax the entire amount is not taxable.

• On the Pennsylvania Retirement Income Summary select Edit 
• On Tell Us About Your Retirement Income, check the box Entire amount of this distribution is not taxable in PA

PA says: "If you received a distribution from an IRA and rolled the entire distribution (100 percent) into a Roth IRA directly, or within 60 days, the distribution is not taxable income for PA purposes."

How do I know if the amount on my 1099R (1099-R) is taxable on my PA Personal Income Tax Return?

[Johnny28]

Thanks for reply. I checked the box and this message is displayed upon review. Since not taxable, this should be ignored?

Thanks again

[DianeW777 · Accepted solution]

The rollover must be designated as such on the PA tax return.  When you are signed into your TurboTax account, select the State tab.  When you are reviewing the PA return you must select the proper information on the screens shown below for your rollover.

As indicated by our awesome Tax Expert @ErnieS0:

• PA says: "If you received a distribution from an IRA and rolled the entire distribution (100 percent) into a Roth IRA directly, or within 60 days, the distribution is not taxable income for PA purposes."

@Johnny28

[Johnny28]

Thank to everyone for the help.

[Martha D · Accepted solution]

Thanks. The problem that I was having is that the code in box 7 on the 1099-R was a 7. It had federal taxes taken out of it. I sent a check into the investment company for the amount that they sent to me plus the federal taxes that they deducted.  When I used the rollover option, it made this taxable income even though 100% was rolled over. I put code J1 (Traditional or Roth IRA; I'm over 59.5) in the PA Type column and it then made it non-taxable. I also have a Form 5498 IRA Contribution Information form that was mailed to me which gives the complete balance of the three rollovers. I am hoping that this will work for the State of PA,

Thanks for your help.