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March 3, 2009

How Should I Report a Rollover Contribution

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How Should I Report a Rollover Contribution

I received a Distribution of rollover eligible assets from my 401(k) plan and later rolled over the amount to my IRA. The rollover was completed within the 60-day period, including the amount that was withheld for taxes, which I made up from my regular savings. How should I report the transaction on my tax return?

Since the amount was rolled over within 60-days, it is not taxable. Therefore, you should report it on your tax form (Form 1040) as a non-taxable distribution. The gross distribution amount should be input on Line 16a* of Form 1040 or line 12a of Form 1040A. Input zero on line 16b/12b to indicate that none of the amount is taxable. You will receive a copy of IRS Form 1099-R from the payer, reporting the distribution. Be sure to provide a copy to your tax preparer and let him/her know that you rolled over the amount within 60-days. Your IRA custodian should provide you with a copy of IRS Form 5498, reflecting the rollover contribution.  Form 1099-R should be mailed to you by January 31 and Form 5498 by May 31 of the following year.  For instance, if the distribution and rollover occurred during last year, your 1099-R is required t be issued by January 31 of this year and your Form 5498 by May 31 of this year.

*Note: If the distribution was made from an IRA, the line number would be 15 instead of 16.

The amount withheld for income tax will either increase any tax refund for which you are eligible, or decrease any income tax amount you owe.
Caution: This response assumes that the amount is rollover eligible. Amounts that are not rollover eligible are required to be included in your income; and such amounts can create excess contributions to your IRA if rolled over.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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