I rec'd a class action settlement check for approx $50.00 for my Roth Ira account. Fidelity will code it as a deposit only not a contribution. Do I need to report it as misc income?
You'll need to sign in or create an account to connect with an expert.
These proceeds are called "restorative payments" and the IRS has ruled that they can be transferred back into the account that incurred the losses as a non reportable direct transfer that is not treated as a contribution. If the IRA account in which the loss occurred is still open, the payment should be transferred to that account. The ease of depositing the payment check into a different account may depend on how the payee reads on the check. In many cases the account that incurred the loss has been closed, and the IRS does not have an issue with the check being deposited elsewhere if the check is made out in a form that the new custodian can accept.
These proceeds are called "restorative payments" and the IRS has ruled that they can be transferred back into the account that incurred the losses as a non reportable direct transfer that is not treated as a contribution. If the IRA account in which the loss occurred is still open, the payment should be transferred to that account. The ease of depositing the payment check into a different account may depend on how the payee reads on the check. In many cases the account that incurred the loss has been closed, and the IRS does not have an issue with the check being deposited elsewhere if the check is made out in a form that the new custodian can accept.
... and no, it's not reportable as miscellaneous income. If not deposited in to a Roth IRA as a restorative payment it must be treated as a Roth IRA distribution. (A $50 Roth IRA distribution would almost certainly be a distribution from your contribution basis and therefore would be reportable but nontaxable.)
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
debbiecply
New Member
kishorchandra joshi
New Member
darline1
Level 1
bikr2679
Level 1
Eclipse2024
Level 1
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.