Rollover/Severance

[taxguy057]

Got a client that took a distribution out of 401k and placed in a IRA account, but distribution code still showing "1" in box 7 with taxable amt showing in box 2a. She has a statement from the IRA account showing it is a rollover account where she gets smaller amts withdrawn out since she was laid off from her job. Isnt the rule that a taxpayer has 90days to put money into a qualifying account after withdrawal if not a direct rollover? Also she recieved a severance package amt. Where does that go on return?

HELP!!!! :unsure:

[jainen]

>>Isn't the rule that a taxpayer has 90 days to put money into a qualifying account after withdrawal if not a direct rollover?<<

Something like that. How long did she take? In any case, the 1099 just shows the distribution. It's up to the taxpayer to explain what happened after that, using a marginal entry on line 16a.

>>she received a severance package<<

What did she get? Probably wages and sick pay included in the W-2.

[taxguy057]

it was within 2wks of recieving the money that she put it into an account. tha severance pkg she received $30,000 cash, but nothing on w2 stating that.

[neilbrink]

it was within 2wks of recieving the money that she put it into an account. tha severance pkg she received $30,000 cash, but nothing on w2 stating that.

Complete the 1099-R worksheet. Under 2a, fill in the amount that was rolled over. Be sure the other information is filled in correctly from the 1099-R. On your 1040, you should see the amount distributed in 16a, with 0 showing in 16b and the word "Rollover" written beside it. Hope that helps.

Neil

[TAXBILLY]

I believe they are required to withhold from a 401(k) distribution. Are you sure he rolled over the amount and the withholding?

taxbilly

[Tax Prep by Deb]

I believe they are required to withhold from a 401(k) distribution. Are you sure he rolled over the amount and the withholding?

taxbilly

You are right about "required" but I have had several come through as normal distributions with nothing withheld. So "required" and "doing" are sometimes two different things!

Deb!

[taxguy057]

Thanks guys for all the help! i got rollover part taken care of. now im stuck on what she received for severance pay. It was 30,000, but noting show on W2's for it. She just told me thats what she received. Am i missing something with this. Nothing in the 1040 tax guide explains severance pay.

[kcjenkins]

That is because 'severance pay' is simply 'pay', and should be included in the W2. Which it very well may have been. I'd call the company, and ask, because it certainly should be in the W2, and in my experience it normally is there, the client just did not realize it.