Earlier the previous year you moved money out of one retirement account and into another; most commonly this happens when a person leaves their job and moves their money from their 401(k) into their new employer’s retirement plan, or into an IRA.
The transfer went smoothly, going directly from one account and into another.
But then something weird happens; after the first of the next year, you receive a tax form that references your rollover.
But that doesn’t make sense, right? You completed the rollover specifically so you would not have to pay any tax. After all, that is what those retirement accounts are for!
And you’re right! Assuming the rollover was completed correctly, and was done as a trustee-to-trustee transfer (from one brokerage company to another), and the rollover was not from a Traditional account to a Roth, then you will pay no tax.
So Why Did I Get a 1099-R Tax Form?!
Despite being nontaxable, the rollover is still a reportable transaction for your tax return.
Check to make sure that there is a Code G in Box 7 Distribution Code(s). This code signifies that a rollover was completed properly.
If you think the rollover was done properly and there is not a code G, contact your brokerage company to see if you can have the 1099-R reissued correctly.
So How Do I Report the 1099-R on my Tax Return?
To report the rollover, write in the line that says Pensions and Annuities the full amount of the rollover. In the box next to it- Taxable Amount- write in 0, unless you have other taxable pensions or annuities to include in that line.
On the line in between these two boxes, write in capital letters ROLLOVER. This should, hopefully, signify to our friends at the IRS that this transaction is indeed a rollover.
To ask your questions, please leave a comment below.
This article does not constitute legal or tax advice. For help regarding your specific situation, please consult a local advisor.