Withdrawn 401K & Pension funds re-deposited as Rollover Traditional IRA

[twoomnm]

Owing to lay-off caused by the COVID-19 pandemic, my employer has requested me to withdraw my 401(K) and Pension Funds last November. They send me two different checks afterwards. I have deposited them (in full amount without taking any cash) in a new Rollover Traditional IRA account (with Citibank) in early December 2020. Form1099-R is for withdrawal, is there anywhere that I should report that I have re-deposit them into another retirement plan account.

Since I received two Form-1099-R for both accounts, I have input all transactions into Turbotax Deluxe. On completion of all transactions, the system performs Smart Check and pops up a window showing that I have to file Form 2210 or 2210-F and make annual payment of $2,563. Is there anything wrong with my inputs.

Appreciate it very much if you could help me in this regards.

[DanaB27]

Yes, you can tell TurboTax that you put the money into an traditional IRA and therefore did a rollover. Please enter both 1099-R by following these steps:

1. Open your return
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R” and enter your 1099-R
4. Continue "Tell us if you moved the money through a rollover or conversion" and select "I rolled over some or all of it to an IRA or other retirement account within the time limits (normally 60 days)"
5. Continue answering the questions.
6. When you get to the “Your 1099-R Entries” screen click on "Add another 1099-R" and enter you 2nd 1099-R

You can review your entry on Form 1040 line 4. The amount rolled over should not show in line 4b (taxable amount).

Please see Why am I getting an underpayment penalty for a tip to reduce or possibly even eliminate your underpayment penalty,

[twoomnm]

Hi DanaB27:

I did following your steps up to Step 3, I didn't find "Tell us if you moved the money through a rollover or conversion" mentioned in Step 4.

After clicking on "Continue", it prompts up another windows saying that "Did you take disaster contributions in Prior Years or Repay any Prior Year Disaster Distribution in 2020?".

I will try deleting the entries and input again.

Please let me know if I skipped any steps, thanks.

[twoomnm]

Hi DanaB27:

I noticed that Box 7 in both Form 1099-R marked with "G" which indicates "Rollover or Rollover Contribution". As in your response, it won't shown in Line 4 as Taxable Income. On preview of Form 1040, the total IRA amount shown in Line 5A and marked as "Rollover" in Line 5B.

I have another question about Form 2210 or 2210-F, I filed everything that I know in last couple of years. I didn't missed anything, why IRS said I made underpayment and have to pay penalty annually.

[DaveF1006 · Accepted solution]

It depends. According to this IRS link, you may have been assessed an estimated  tax penalty because you should have made estimated tax payments last year. Here are the possible reasons for the penalty.

1. If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.
2. Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller. More than likely, you owed more than $1000 this year.

You can avoid paying the penalty if:

1. You didn't make a required payment because of a casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
2. You retired (after reaching age 62) or became disabled during the tax year or in the preceding tax year for which you should have made estimated payments, and the underpayment was due to reasonable cause and not willful neglect.

If you qualify for these exceptions, Turbo Tax will address this in the program.