Taxpayer asks:
I had a IRA from a former employer that was rolled over to a brokerage account in 2006. While preparing for my tax appointment, I contacted the brokerage house to find out if I was due a 1099 as I hadn’t received one. They said no. So I went to my appointment, got my taxes done and off they went to the IRS. On Monday of this week, I received my 1099 from my former employer (it was a general board of pension 403b account that manages their own funds), apologizing that they didn’t send it to me when they were supposed, citing a glitch in their system.
So my question is…I’ve received no gains, everything I had was rolled-over. I’ve already submitted my taxes for 2006. Do I need to amend anything and how can I strangle the general board that had managed my 403b 😉
I haven’t been able to get in touch with my tax adviser, so I hope you don’t mind the question, especially given it’s a busy time for all tax professionals.
Thanks so much!
Taxgirl says:
Internal Revenue Service rules for IRAs generally require traditional IRA account holders to wait until age 59 1/2 to make a withdrawal with no penalty. If you withdraw prior to age 59 1/2 and qualify under an exemption for the penalty, you are likely still required to report the distribution as income. However, there are circumstances when you can make a “withdrawal” from one plan and not have it qualify as income or be subject to penalty. The most common example is if the “withdrawal” qualifies as an administrative rollover (meaning it was merely transferred from one financial institution or plan to another). In an administrative rollover, at no time should you have control over that money, meaning no checks written to you – you never touched the money. Get it? In that case, there should be no tax consequence to you.
If this was intended to be an administrative rollover, I would:
1. Double-check your 1099-R to make sure that the rollover is properly noted; and
2. Assuming that it is, amend your return to show the receipt of the 1099, but that it’s not taxable income, and send your 1099-R with the amended return to IRS.
You could just let it go but the IRS requires that you send forms 1099-R to them so a clerk somewhere is going to see the 1099-R from your employer and wonder why it wasn’t reported on your end. You don’t want to trigger an unnecessary investigation into your tax return. A lot of hassle for no change.
Sorry to hear it!
Good luck.
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
I work for a benefits company and we’ve been a little confused by new Roth IRA rules. We have retirees who have after tax money that is non taxable and they are coded, 2 or 7 based on the IRA Distribution codes on the form 1099R.
If theses retiress now want to change the payment to a Roth IRA, do we change this distirbution code to G? In the past we never changed the distribution code if the retiree changed the payment from him/herself to a rollover.
Thanks,