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Why Did I Get A 1099 For My 401k Rollover

 



A 1099-R form should come from your (previous) investment provider if you rolled over a 401(k) last year. Of course, you'll ask: Did something go wrong? Does the transaction involve taxes? You should not owe taxes if the rollover was handled correctly.

Have you received your 1099-R yet? If you don't have an actual 1099-R yet, notify your 401(k)'s investment provider so they can find it for you. You might be able to get a copy by email or fax before it comes, if they can.

1099-R Anxiety

After a 401(k)rollover, most people are surprised to receive a 1099-R. The IRS does not have to know about the transfer of funds to another retirement account since they rolled over the money directly. People believe they are going to owe income taxes once the IRS gets involved.

401(k) rollovers are not mistakenly accompanied by a 1099-R. You must send the form to the investment company that held your funds and the IRS must receive the distribution report. As a result of rolling the money over into another retirement plan (such as an IRA, 401(k), 403B, SEP, etc)., you won't need to pay income taxes on the transfer. The form is for reporting purposes only.

Reporting 401(k) Rollovers on 1099-R

To prepare a 1099-R properly, make sure that it was completed correctly. Your 1099-R should have a box seven where, ideally, Ideally, 1099-R. form 1099-R. An ideal sight would be to find the letter "G.". The transaction has been reported correctly as a rollover if this is the case.

N.B Ensure that the form you received indicates a rollover with the letter "G" (in Box 7). When financial institutions refer to your rollover as a distribution, it becomes even more confusing.

 

401(k) rollover errors

In box number seven, you will have a problem if you do not have a G. You could have some headaches if your 401k provider failed to report the distribution correctly. Why is that? You would most likely owe income tax (and possibly penalties) on a "distribution" if the IRS believes you did not roll the funds into a different retirement account. Find out how the IRS coded the distribution and what it means for your taxes.

Contacting your former employer or the investment provider may help you resolve the issue. If you come across an error, you must take action immediately - otherwise you will forget about all the details, etc. 

How things could have gone wrong, and who you talked to. If you need any records, contact the company that printed the check (the investment provider).

Rollovers that have not been coded correctly - and not corrected - will eventually lead to you being notified by the IRS that your income has been underreported. Distributions are counted as income, and your income is expected to generate some revenue. 

To prove that you actually rolled your income over, you will need a corrected 1099. Alternative options may be available if that is not feasible. By presenting a copy of your rollover check (payable to your IRA or other retirement account), you may be able to prove that you rolled over your funds.

You should also show your account statements with each transaction: when your 401k money leaves and when it enters your IRA. Ensure the statements list exactly when you rolled over so there are no questions about the 60-day rollover rule (especially if you rolled over again within the same year).