IRA Rollover from annuity

[derohanes]

I wanted to transfer from my annuity IRA to my brokerage IRA in 2021.  I asked the brokerage to initiate the transfer of a Roth and and IRA account to my respective brokerage accounts.  The Roth was submitted, but the IRA was handled as a "Surrender", which means it was turned into cash, and put in my bank, which I subsequently sent to my IRA.  I received a 1099-R for the "surrender"  with a taxable amount in box 2a. I think there is a transfer period that is allowed for the rollover in cash.  How do I handle the transfer in TurboTax while entering the 1099-R?

[JohnB5677]

Yes, You have 60 days from the date you receive an IRA for a retirement plan distribution to roll over to another plan or IRA. 

To correctly post this go back to the original posting for the 1099-R distribution.

1. Enter your 1099-R details into the input screen
   1. Be sure the Box below Box 7 is checked for an IRA
2. Continue through the interview until you come to
   1. Tell us if you moved the money through a rollover or conversion
   2. Select  I rolled over some or all of it to an IRA or other retirement account within the time limits (normally 60 days)
3. Continue to the end of the interview.

[jimthomson1313]

I withdrew $150,000 for a few weeks last summer, and returned it within the 60 day limit. I also took $31,000 out of the account during the year.  My 1099-R has the same amount, $181,000, listed in both box 1 and 2a, and also had Box 7 marked as 7, normal distribution, instead of as a rollover. How do I fix this? TurboTax is calculating a huge tax debt.

[ThomasM125]

@jimthomson1313  You have to answer some questions in the form 1099-R entry screen in TurboTax to fix your problem.

After you enter your 1099-R form, you will see a screen that says What Did You Do With The Money from (name of investment.) To which you should answer that you moved the money to another retirement account and also that you did a combination of rolling over, converting, or cashing out the money. Then, you will see a box where you can enter the amount you rolled over to another retirement account. The amount you enter there will not be taxed.

[derohanes]

I don't know if I'm in the right place, but I don't see that question.  Below are the questions from the "Your 1099-R Entries," where I select "Edit."

1. Did you take disaster distribution... (Answer:No)
2. Where you employed as a Public Safety Officer? (Answer:No)
3. Then there is a "Special Averaging" screen. (Answer:No)
4. Describe Taxable Amount. (Answer:Yes)
5. Then back to the "Your 1099-R Entries" screen.

[ThomasM125]

@derohanes You must indicate that you moved the funds to another retirement account to get the options to indicate that the funds were rolled over. You will see this page after you enter your form 1900-R:

[derohanes]

@ThomasM125 I deleted the entry and re-entered the information in the 1099-R screen.  Before the screens I listed above, I get a screen asking if the IRA/SEP/SIMPLE box is checked.  Mine is not.  Otherwise the only screens I get are the ones I listed above.  Is there something else that needs to be checked to get the screen asking what I did with the money?

[ThomasM125]

@derohanes You have to indicate that the distribution is from a Qualified Plan or you won't be able to do a tax-free rollover and you won't see the screens I referenced. Go back through the 1099-R entry and look for the screen that says Was This Distribution From a Qualified Plan? and make sure you indicated that it was, if applicable.

[derohanes]

@ThomasM125 Box 7 is coded as 7D, which is annuity payments from nonqualified Annuities. I assume that's why?

[dmertz · Accepted solution]

The code D indicates that you sold a nonqualified annuity.  Such an annuity is not eligible for rollover.  By putting the proceeds of the surrender of the nonqualified annuity into an IRA, you made a new IRA contribution, not a rollover.  If the amount that you put into the IRA was more than you were eligible to contribute for 2021, you've made an excess contribution to the IRA.

If you told the IRA custodian that this was a rollover, you'll need to contact them to make the correction to show that this was not a rollover but was instead a regular contribution, otherwise the Form 5498 that they send to you and to the IRS will incorrectly show this as a rollover.

If this has resulted in an excess contribution for 2021, you'll also need to request that the custodian make an explicit return of excess contribution, otherwise the amount of the excess will be subject to a 6% excess contribution penalty every year it remains in the account.