From: Ann Arbor, Michigan

Greetings TaxMama.

I rolled over a standard IRA and received a distribution check for the total in the account.

Within two hours on the same day I opened a rollover IRA at a new Bank.

My question is:

When does the new recipient of my IRA notify the IRS that the rollover was completed.

Thank you again for your humorous and valuable information.

Frank

 

 

 

Hi Frank,

Hopefully, your previous IRA folks didn't deduct any withholding taxes? If they did, please make sure to replace those funds and deposit them into the new IRA - otherwise, as with all things tax, you'll be taxed on the taxes withheld.

But that doesn't answer your question.

All this reporting takes place in Jan & Feb of next year.

The banks will send their 1099s to IRS with a copy to you. Your first bank will issue you a 1099-R with a code G, which means a rollover. If they use practically any other code, the transaction would appear to be taxable to IRS. In which case, you'll ignore their wrong code, use G when you prepare your tax return - and attach a note to IRS explaining it was a rollover. You could even attach a copy of the 5498 that I will describe next.

Meanwhile, the new bank will issue a Form 5498 - IRA Contribution Information - sent to IRS with a copy to you. (Yes, I just got one yesterday from Scottrade for last year. Do you think they're running a little bit late?) That 5498 should show an amount in either box 1 or 2. In your case, since you got the check and deposited it - it will be in box 1. If the first bank had issued the check directly to the second bank, it would have appeared as a rollover.

Is this so totally more than you want to know?

Just hang on to all the records so you don't accidentally get stuck with a tax you don't owe.

Best Wishes,
Eva Rosenberg, MBA, EA