Terry D EA Posted February 27, 2016 Report Share Posted February 27, 2016 Client's employer went under. At the time, my client had the amount of his 401K issued to him as a check with the required taxes withheld. Well within the 60 day period, he put the entire amount including funds from another source to cover the taxes withheld into another IRA account. I know this is a tax free transaction and there is an exact situation in pub 590 that explains his situation word for word. He received a 1099R for the distribution and in box 2 the total distribution amount as taxable, coded 1 and showing the taxes withheld. So, far I think this was done right. He also received a receipt from Fidelity showing the total original distribution amount as added back in. When I enter the 1099R, the total amount becomes taxable and generates an early withdrawal penalty as well. How do I report this? I have looked everywhere for a form that will allow me to report this as a tax free transaction. I just can't leave the 1099R out of the return either. What to do? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 27, 2016 Report Share Posted February 27, 2016 Did you put the rolled over amount in the third box? It's on the same form, no extra Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 27, 2016 Author Report Share Posted February 27, 2016 Okay never mind I found where the input was to adjust the 1099R amount that is not taxable. I am use OLT software and found the entry at the very bottom of the 1099R input. Entering the amount there removes the 5329 and additional penalty as well. 2 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 27, 2016 Author Report Share Posted February 27, 2016 1 minute ago, kcjenkins said: Did you put the rolled over amount in the third box? Not sure where you are talking about. But thanks anyway. I guess I have been brooding over this return too long. Trying every trick I know to reduce the taxable amount due. 1 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 27, 2016 Report Share Posted February 27, 2016 Sorry, Terry, on ATX the place to put the rolled-over amount is the third input box. Did not realize you used a different software. But on any software, it should be somewhere on the 1099R form. Glad you found it. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 27, 2016 Author Report Share Posted February 27, 2016 Quote KC I have not used ATX since the CCH takeover. However, I will tell you I had to install the 2007 year and I do miss the smoothness and all of the features of the old software. I have spoken with one the ATX representatives this year and am seriously thinking of going back. This year is seems as though folks aren't having as much difficulty as before. I always used MAX and wonder if it is still relatively the same. 1 Quote Link to comment Share on other sites More sharing options...
Possi Posted February 27, 2016 Report Share Posted February 27, 2016 Use the 5329 to report the rollover amount, and the exclusion. I use TW, and we can link to that form from Line 59. Quote Link to comment Share on other sites More sharing options...
fredazcpa Posted February 27, 2016 Report Share Posted February 27, 2016 I use Drake and in the 99R input there is a box to mark and enter the amount rolled over, the difference is added to the income and the word "rollover" is printed on that line Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted February 27, 2016 Report Share Posted February 27, 2016 Even with these steps, be ready for the CP2000 next year. Have the client put together the following items in preparation: 1. Copy of the stub that came with the check she received. a. Must show the date the check was received. 2. Copy of the deposit receipt from the new company a. Must show the date she made the deposit b. Must show the amount of the deposit made. When the CP2000 arrives, include those documents with a note explaining. We have done dozens, even though we input the amount rolled over as described above. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 27, 2016 Author Report Share Posted February 27, 2016 6 hours ago, Possi said: Use the 5329 to report the rollover amount, and the exclusion. I use TW, and we can link to that form from Line 59. 5329 is for early distributions. I don't see anywhere to report the rollover. However, you can report the exception to the early distribution penalty. 1 hour ago, fredazcpa said: I use Drake and in the 99R input there is a box to mark and enter the amount rolled over, the difference is added to the income and the word "rollover" is printed on that line Agree, if there is a difference between the amount rolled over and the actual distribution such as not using other funds to payback the taxes withheld then it is income. I am looking for somewhere in the software the 1099R is recorded and the election to rollover is also recorded so the IRS knows what took place to avoid the scenario Jack mentions. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted February 27, 2016 Report Share Posted February 27, 2016 14 hours ago, Terry D said: Okay never mind I found where the input was to adjust the 1099R amount that is not taxable. I am use OLT software and found the entry at the very bottom of the 1099R input. Entering the amount there removes the 5329 and additional penalty as well. Does your entry you describe actually cause the software to print the word "ROLLOVER" in the left margin? It should show "Rollover" and report the total distribution in box 15a and a -0- in 15b. That is the proper reporting. If you aren't getting that result, a call to OLT is in order if you can't figure out the proper input. Also, unless the 60-day period spanned the two years with the rollover occurring in 2016, if the rollover was contributed back into an IRA in 2015 the amount will be reported in box 2 of the Form 5498 that will be issued later this year. 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 27, 2016 Author Report Share Posted February 27, 2016 My final take on this is, the client has form 5498 in his possession that shows the rollover contribution. I am going out on a limb here and assuming that form 5498 is reported to the IRS. If not, then it definitely can be used to substantiate the rollover if and when the CP2000 arrives. The software indicates rollover on form 1040 page 1. Form 5498 contribution amount reflects the exact amount indicated on form 1099R. I think I have this covered. 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 27, 2016 Author Report Share Posted February 27, 2016 Jud, I was typing as you replied and as you can see we both agree. The software does indeed have the "rollover" and the amount in box 16A which I am assuming because of the 1099R the indication is a distribution from an annuity or some other retirement funds. I only input exactly what is on the 1099R. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted February 27, 2016 Report Share Posted February 27, 2016 5498s are filed with IRS. Sounds like you found the proper way to input this. FWIW, I've never had a rollover questioned that was reported properly. The last notice I had to answer like this was a person that came to me where his previous preparer hadn't shown the transaction properly on the return, but I got it straightened out for him. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted February 27, 2016 Report Share Posted February 27, 2016 9 minutes ago, Terry D said: My final take on this is, the client has form 5498 in his possession that shows the rollover contribution. I am going out on a limb here and assuming that form 5498 is reported to the IRS. If not, then it definitely can be used to substantiate the rollover if and when the CP2000 arrives. The software indicates rollover on form 1040 page 1. Form 5498 contribution amount reflects the exact amount indicated on form 1099R. I think I have this covered. The 5498 does not substantiate the date of the deposit. Have your client gather the documents I mentioned, while he still has them, and put them in his file for next year when the CP2000 shows up. It has been my experience that Form 5498 is ignored by the IRS, in all cases. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 27, 2016 Author Report Share Posted February 27, 2016 >>>>>>The 5498 does not substantiate the date of the deposit<<<<<<< I respectfully disagree. The form 5498 that I am currently looking at indicates the time period the contribution was made which is the same time period the withdrawal occurred which is well within the 60 day window. The receipt of the contribution also reflects the same dates. So, I feel comfortable that I have this well covered. However, you and I both know anything can happen with the IRS. I do appreciate your input and it appears my client has all of the documents you mention. Thanks Jack 1 Quote Link to comment Share on other sites More sharing options...
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