Report a Rollover

[SensibleandHourly]

Hello All, 

I just had a client email this question: 

"I just learned that you are supposed to report 401K rollovers on your tax return.  I had a big rollover in 2020 and never reported it.  I looked on Fidelity's site and there is a 1099 form there."

I think she only had one rollover. Any advice on the types of questions I should ask?

p.s. I didn't prepare those taxes for her. 😉 

Thank you!!

[sjrcpa · Accepted solution]

Get the 1099-R.

See if it has a rollover Code.

If not, have client provide proof of rollover.

Then discuss with client whether she wants to pay you to amend the return, or wait for an IRS matching notice and pay you to respond.

[Just-Lisa-Now-]

If it was a trustee to trustee rollover, Dist Code G, Im not sure IRS will even send a CP2000 for that.

[sjrcpa]

Neither am I.

[qbteachmt]

"Any advice on the types of questions I should ask?"

Get the details, such as from 401(k) only? Or, was some of it from/put into a Roth? Into what type of account(s) for the from and to, and if there was/is basis, and was any converted? And get the 1099-R and also the 5498, to substantiate answers. Many 5498 came out mid-Aug, for 2020 in 2021.

[SensibleandHourly]

HI there, 

I have been able to clarify that it was Code G, trustee to trustee move, only one for the year. 

Thank you, everyone, for the advice. 

[rbynaker]

I'm with Lisa, I would just ignore a missing Code G 1099-R.  Nobody's going to be looking for something that's not taxable.

Rick

[qbteachmt]

Code G is not always nontaxable, just because it is direct. You have to confirm there was no conversion involved. And you stated: "I think she only had one rollover." An employer that provides for Roth 401(k) will put the match into the 401(k), which makes 2 accounts to roll, and that means confirming they went their separate ways.

[MsWendy]

Actually, they did send a CP2000 to my new client, who prepared her own return in 2020.  It was a direct qualifying rollover.  The 1099-R is coded 7.  

[Just-Lisa-Now-]

if its coded 7 then it doesnt sound like a direct rollover into another retirement account....ask for the statement for the account where the money went.

[qbteachmt]

There are two parts to a roll over, at a minimum.

The 1099-R is for money Out.

One or more Form 5498 exist if there is money In, somewhere similarly qualified (Trad, Roth).

There also might be some amount they keep, or deposit to checking.

There might also be some amount withheld for taxes, unless they did this direct to a similarly tax-deferred account.

Get the 1099-R.

Get any 5498 for the same money. Get any statements for whatever accounts they also used for the funds' destination.