2018 IRA Distribution - Rolled Over within 60 Days 2019

[Yardley CPA]

A client, MFJ, 72 years old, had a distribution from her IRA to help purchase a home.  The distribution of $222,350 was made on December 10, 2018.  A new home was purchased on  December 17, 2018.  Their Old home was sold the day after.  Exclusion applies.  Proceeds from the sale of the old home were used and $210,000 was re-deposited back into the IRA on January 2, 2019. 

The $210,000 can be treated as a tax-free distribution since it was rolled within the 60 day period, correct?    The ATX entry on the 1099R would show:

•  Gross Distribution $222,350
• Taxable Amount $222,350
•  Rollover Amount Included in Line 2A $210,000.  

Is this correct?  Questioning myself because the rollover, while within the 60 day period, did not happen until 2019.

[grandmabee]

Yes, within 60 days doesn't matter if different calendar years.

[Pacun]

It seems right and remember that your client has to take mandatory distributions due to age.

[Max W]

I don't think a 1099R will be issued as a rollover (Code G), because the rollover wasn't from one institution to another.

Ir will have to be documented with the appropriate records.    I went through this once with a client who had self prepared the return and got a CP2000, which was reversed when the documentation was presented.

 

 

[LouD]

I started attaching the appropriate details from IRA statements showing the 60-day rollover period was met to the eFile because the IRS would always send out a CP2000 - and haven't had one since so they are definitely receiving the attachments and saves the headache from coming back later.

[Yardley CPA]

7 hours ago, Max W said:

I don't think a 1099R will be issued as a rollover (Code G), because the rollover wasn't from one institution to another.

Ir will have to be documented with the appropriate records.    I went through this once with a client who had self prepared the return and got a CP2000, which was reversed when the documentation was presented.

 

 

 

6 hours ago, LouD said:

I started attaching the appropriate details from IRA statements showing the 60-day rollover period was met to the eFile because the IRS would always send out a CP2000 - and haven't had one since so they are definitely receiving the attachments and saves the headache from coming back later.

Good morning...the 1099R is coded as a 7 and when I saw that I immediately thought a CP2000 may be in our future, Max.

Lou...your thoughts are mine as well.  I have already asked the client for paperwork showing the re-deposit and plan on attaching it to the return.  

 

Thanks to all those who chimed in.  Much appreciated. 

 

 

[ILLMAS]

Did they consulted with you before hand?

[Yardley CPA]

55 minutes ago, ILLMAS said:

Did they consulted with you before hand?

Do you think they did??    

All my correspondence with my clients says to reach out to me during the year if you anticipate any changes or look to withdraw any funds from an IRA or Pension.   Not many listen.  

[ILLMAS]

5 minutes ago, Yardley CPA said:

Do you think they did??    

All my correspondence with my clients says to reach out to me during the year if you anticipate any changes or look to withdraw any funds from an IRA or Pension.   Not many listen.  

We all figured that, I hope you get compensated very well.

[Jack from Ohio]

There is still a CP2000 in your future.  No way to prevent it.  IRS will be looking for the taxable amount, on the 1099-R to be shown as taxed.

Client will need the following, when they receive the CP2000

1. Copy of a document, showing the exact date withdrawn, and how much.

2. Copy of a document showing the exact amount, and date, that was money redeposited.

The IRS will not see the re-deposit amount, thereby initiating the CP2000.  I have had to deal with this many times.  Since they took a distribution, the redeposited money later, there is no way to prevent the CP2000, by entries on the 2018 return.

 

[Hahn1040]

the distribution will be reported as code 7.  This distributing company doesn't know what she did with the funds

When it was deposited into the IRA at the new company, it should have been coded as a rollover and will be reported on for the form 5498 as a rollover

If it is reported as a regular contribution, then that is a problem.  She likely has NO earned income and even if she did, the amount is way over the annual contribution amount.

The IRS will see both of the transactions on the forms 5498.

IF she receives a CP2000, it is easily resolved with the documentation.  Hopefully, when she receives the envelope from the IRS, she doesn't go into a panic!

 

[Catherine]

What Jack and Hahn (and others) said.  Get the documentation NOW. Sure, send it in now (likely they won't notice it).  Heck, I'd even write the letter now (or at least make notes, as you presented for us here), while it's all fresh in your mind.  When (not if) the cp2000 shows up, you'll have everything for rebuttal.  

[joanmcq]

Code 7 doesn't matter.  It would't be a G because it wasn't done as a trustee-to-trustee transfer.  The software should print ROLLOVER to the left of the IRA/Pension line, but I've seen where that didn't stop the CP2000.

[BulldogTom]

Yeah, I had to do one of these last year.   Sent in the 5498 from 2018 and the 1099R from 2017.   Wrote a letter giving the date of the withdrawal and the date of the deposit into the new account.   No change letter showed up about 3 months later.   Even though the "Rollover" was on the tax return we still got the CP 2000.

Tom
Modesto, CA

[DANRVAN]

On 2/23/2019 at 8:12 AM, Yardley CPA said:

 

•  Gross Distribution $222,350
• Taxable Amount $222,350
•  Rollover Amount Included in Line 2A $210,000.  

 

I have reported like that without receiving a cp 2000, maybe just by luck.

I would deal with it when it comes after tax season instead of spending time and billing client on it now