PATaxlady Posted March 4, 2022 Report Share Posted March 4, 2022 Client took a total 401K distribution and then rolled it over to a Roth IRA within 60 days. I know this distribution is taxed but it should not be subject to the early withdrawal penalty since it was rolled within 60 days. If I say it was a rollover it is not taxed or penalized. If I do not say it is a rollover it gets taxed but also penalized. I looked on the 5329 for an exception but there is none. Does anyone know how to report this so that the distribution is taxed but no penalty applied. Thank you in advance for any help out there. Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted March 4, 2022 Report Share Posted March 4, 2022 I think from a 401(k) it should have been transferred to a traditional IRA (a conduit IRA) and then converted to a Roth. I don't know if you can show it as a rollover to an IRA and then a conversion or not. Quote Link to comment Share on other sites More sharing options...
Lee B Posted March 4, 2022 Report Share Posted March 4, 2022 Makes me shake my head, clients who just do stuff then expect us to figure it out. Quote Link to comment Share on other sites More sharing options...
mcbreck Posted March 4, 2022 Report Share Posted March 4, 2022 Personally, I'd use 5329 and exception 12 (other). This is one of the rare instances where I'd upload a pdf proving the contribution is within 60 days. The 1099r has the date of distribution so you can upload a copy of their statement showing the deposit. There is no need to move it from a 401k to a traditional IRA and then a Roth IRA. Quote Link to comment Share on other sites More sharing options...
mcbreck Posted March 4, 2022 Report Share Posted March 4, 2022 4 minutes ago, cbslee said: Makes me shake my head, clients who just do stuff then expect us to figure it out. Isn't that our job? It's a completely appropriate maneuver if done correctly. If the receiving firm coded it correctly, the IRS already knows what happened. 1 Quote Link to comment Share on other sites More sharing options...
PATaxlady Posted March 4, 2022 Author Report Share Posted March 4, 2022 thank you everybody...I just didn't know how to show on the tax return. Taxed but no penalty. I did use the 5329 exception 12 and will attach a statement. 1 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 4, 2022 Report Share Posted March 4, 2022 2 hours ago, Gail in Virginia said: I think from a 401(k) it should have been transferred to a traditional IRA (a conduit IRA) and then converted to a Roth. I don't know if you can show it as a rollover to an IRA and then a conversion or not. I'm unsure and may be wrong, but wasn't that changed back in 2008 but still may be dependent on whether the administrator allows it? 1 Quote Link to comment Share on other sites More sharing options...
Lee B Posted March 4, 2022 Report Share Posted March 4, 2022 Perhaps you should be using Form 8606 instead Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted March 4, 2022 Report Share Posted March 4, 2022 2 hours ago, jklcpa said: I'm unsure and may be wrong, but wasn't that changed back in 2008 but still may be dependent on whether the administrator allows it? I am sure you are right. Sometimes I remember old law better than new law if I haven't had to use it for a while. 1 Quote Link to comment Share on other sites More sharing options...
mcb39 Posted March 5, 2022 Report Share Posted March 5, 2022 21 hours ago, cbslee said: Makes me shake my head, clients who just do stuff then expect us to figure it out. Especially when they call and tell you their intentions and you tell them not to do it; and they do it anyway! Ugh!!! 2 Quote Link to comment Share on other sites More sharing options...
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