Two 1099-R for 401K Early Distribution - which to use?

[Sledhead70]

I am trying to help do my son's taxes and I am completely stuck with entering his 1099s since he has two for the same early withdrawal.  In December, my 20 YO son withdrew all of the 401K money he had in his account from the financial institution (Principal), which he had built up while at a former employer (Coke).  He knows he has to pay the penalty, report it as income, etc.  The issue is that we got two 1099-R docs for the same withdrawal with one being from Principal, and the other from his old employer (Coke).  The two are off by only ~$16, which I have no idea why, but if we enter these both into Turbo Tax then it looks like double the income which isn't correct.  We first thought to call both companies and ask if one had submitted in error, but both said "we don't give tax advice" and left him high and dry.  I figure we aren't asking for advice and just want to know if there is an error or not.  My question here is, am I missing something, and is there a way I would enter both without them being double counted?

[AnnetteB6]

Take a closer look at each document and see if one of them happens to be marked as 'corrected'.  There is a box near the top of the form that would be checked.  If so, enter only the corrected Form 1099-R.  

If one form is not a corrected version, and he did not actually receive a distribution from both entities, then try contacting them again for clarification.  The financial institution that administered the 401k should have sent the distribution as well as the Form 1099-R.

[Sledhead70]

Thank you for the reply.  I should have pointed that out that neither are marked as "corrected".  The financial institution was the one who sent him the distribution, so when we got that 1099-R it made sense.  When the former company sent one too that is where the confusion started.  Worse, they don't seem to care to help resolve it.  I will try contacting them with him to see if I can help as it seems like you are confirming there should not be "two forms".  

[AnnetteB6]

If he did not get two payments or he did not get one payment and rollover another portion to an IRA or new employer plan, then there should not be two forms.  

Take a look at the distribution code on both forms as well.  That may give you some additional information in case they are different codes.  

@Sledhead70

[Sledhead70]

I do see now that the 1099 from Principal has a distribution code of "1", but the one from the former company has a distribution code of "G".  Does that make a difference? 

[AnnetteB6 · Accepted solution]

Yes, that does make a difference.  Here is what probably happened:  

When your son left his job, the employer distributed his 401k to Principal.  That is what is indicated by distribution code 'G'.  It is telling you that the amount shown in box 1 was directly rolled over to another account.  Most likely the money went from the 401k to a Traditional IRA account managed by Principal.  When this Form 1099-R is entered into the return, it should not be taxable.  You will need to answer the questions about what happened to the money by saying it was NOT rolled into a Roth account.  The default then will be that it went into a Traditional IRA.

Then, the Form 1099-R from Principal with distribution code '1' indicates that it was an early distribution from a retirement account that is subject to the early distribution penalty and income tax.  The follow-up questions on this one are less complicated because you just answer that he did something else with the money (cashed it out).

To verify that this is the situation, take a look at any paperwork issued from the employer regarding the cash-out.  Also, take a closer look at any account statements from Principal.  They should indicate that the account is a Traditional IRA.  If they do not, that would be a question you could ask Principal to verify the situation a bit further.

@Sledhead70

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