1099-R & Form 5498

[araltman]

My client received a 1099-R that showed a code of (7), which is the code for "Total Distribution".  In fact, the $140,000 was a roll-over.  When she called the issuer for a corrected 1099 she received a form 5498. I had filed an extension for her and she paid the tax without including tax for the $140K.  I then called the issuing company, they told me that the Form 5498 was the correct form and they would not issued a corrected 1099-R.  My problem is that I know the IRS has a 1099-R showing a total distribution that is taxable, so the 5498 would do no good if it were not matched somehow.  My solution could be to file her return showing tax on the $140K, then file an amended return and......???  Don't know what to do without causing a big mess. 

[BobKamman]

Total amount goes on Form 1040, LIne 5a.  Taxable amount (zero) goes on Line 5b.   If an IRA, then lines 4a and 4b.  IRS sees this about 100,000 times a year and the software should let them know that it was rolled over.  Likely, this was not a trustee-to-trustee rollover; your client received a check, then deposited it within the required time in the new account.  IRS will also receive a 5498 from the new trustee, showing the amount received.  The 5498 from the former trustee is worthless, but the 1099-R from them is not a problem.   

[sjrcpa]

Code 7 = Normal Distribution; not Total Distribution.

Show Total Distribution $140,000. taxable amount -0-. Somewhere in the software you can indicate it is a rollover. I don't use ProSeries so can't help there.

[dd4vols]

Form 1099-R  Page 2, Line B1

[qbteachmt]

"My problem is that I know the IRS has a 1099-R showing a total distribution that is taxable"

Only until you file the tax form to follow up with what happened next. The 1099-R is only the first step and the issuer doesn't necessarily have the info for what happened to those funds. The 5498 then is issued and is meaningful as the next step which reflects what was done, if anything, and for how much of the money, and where.

You stated "rollover" and if that was not Direct, then that's why the first entity issues 1099-R for the distribution coded as such. Even if the entire account was closed, that doesn't make the distribution taxable, if something is then done that makes it not taxable, such as Rollover within the timeframe to a similarly deferred and qualified account.

It seems maybe your client did not take possession of the funds in between, because you do not mention a required withholding that would need to be made up in the gross redeposit to the new account, from the distribution. That is always a consideration = partially taxable due to not making up the missing portion while executing a rollover manually by the taxpayer.

[PATAX]

Although it is too late for this now, in the future try to do a trustee to trustee transfer, and then no 1099R form should be issued  and therefore you should not have to report anything on the tax return.

[IRonMaN]

Or .................... do a little more homework on the subject before starting to panic.