Error in rollover year

[Hamiltonra]

I rolled over $50,000 from another IRA in 2020. However, I deducted it from my 2021 IRA withdraws. Do I need to amend my two returns? 

[Kelly Thomas C]

It's a bit unclear what you did. But let me say this: 1) a rollover and a withdrawal are two separate and distinct transactions. For example, if you transfer money from your checking account to your savings account, this transaction is treated differently than if you take funds out (withdrawal) of your checking account. 2) Rollovers are like checking account transafers. The are non-taxable provided you have transfered from one type of account (IRA/401k) to another similar account (IRA/41k). If you rolled it over from IRA/401k to Roth, this is taxable. And finally, 3) Your withdrawal of funds from an IRA/401, is an unrelated transaction and is most likely taxable. So back to your question, if you netted these two, you did not file your tax return accurately and you should correct this with an amended return.

I hope this is helpful.

Kelly C.

CPA

[Hamiltonra]

Sounds I need to amend the returns to get it into the correct year. Will there be tax penalties when I pay it in the correct year?  It was $13,000 in reduced taxes in 2021. So I’ll owe $13,000 in 2021 but refund by $13,000 in 2020. 

[Kelly Thomas C]

I cannot determine whether there will be a penalty. You can request an abatement of the penalty.

Kelly C.

CPA

[Hamiltonra]

Excellent advice. I hadn’t thought about requesting an abatement for the penalty. 

the session was very helpful. Appreciate your answer to my question.