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Rollovers

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I had pre-tax funds ($22,185.74) in my traditional 401k that I transferred to a traditional IRA and then to a solo 401k. For some reason, tax software put $22,186 in both field 4a and field 5a.


1099-R forms are near identical.

For trad 401k to trad IRA it looks like:

1 Gross distribution: $22,185.74

Total distribution: X

7 Distribution Code: G

All other filed are empty



And for trad IRA to Solo 401k 1099-R looks like:

1 Gross distribution: $22,185.74

Total distribution: X

7 Distribution Code: G

IRA/SEP/SIMPLE: X

All other filed are empty



Did tax software put those rollovers in the correct places? I thought Box 5a of Form 1040 reports the taxable amount of your distributions but in my case those funds are pre tax.
 


Taxing Matters

Overtaxed Member
I had pre-tax funds ($22,185.74) in my traditional 401k that I transferred to a traditional IRA and then to a solo 401k. For some reason, tax software put $22,186 in both field 4a and field 5a.

Did tax software put those rollovers in the correct places? I thought Box 5a of Form 1040 reports the taxable amount of your distributions but in my case those funds are pre tax.
What the program did was correct. You had a distribution from your § 401(k) plan, that gets reported on line 5a. Then you distributed from the IRA, and that distribution goes on line 4a. Both 4a and 5a report the total distribution made, both the taxable and non taxable portions. It is on line 4b and 5b that you tell the IRS how much of that total distribution is taxable.
 

LdiJ

Senior Member
I had pre-tax funds ($22,185.74) in my traditional 401k that I transferred to a traditional IRA and then to a solo 401k. For some reason, tax software put $22,186 in both field 4a and field 5a.


1099-R forms are near identical.

For trad 401k to trad IRA it looks like:

1 Gross distribution: $22,185.74

Total distribution: X

7 Distribution Code: G

All other filed are empty



And for trad IRA to Solo 401k 1099-R looks like:

1 Gross distribution: $22,185.74

Total distribution: X

7 Distribution Code: G

IRA/SEP/SIMPLE: X

All other filed are empty



Did tax software put those rollovers in the correct places? I thought Box 5a of Form 1040 reports the taxable amount of your distributions but in my case those funds are pre tax.
I agree with the previous response but the code "G" is what is key here on both 1099Rs. That code indicates a non taxable distribution/rollover.
 

Bali Hai Again

Active Member
I’m confused by some of the terminology regarding retirement accounts.

Rollover.
Transfer.
Distribution.
Withdrawal.

Questions:

Money taken from one IRA and put into an IRA in a different company is called a?
Money taken from an IRA and put into a 401(k) is called a?
Money taken from a 401(k) and put into a different 401(k) account within the same company is called a? (Some people have two 401(k) accounts within the same plan; money contributed by the employer and money contributed by the employee).
Money taken from a 401(k) and put into an IRA is called a?
Money taken out of a retirement account and put into a bank savings account is called a?

IRA refers to Traditional.

Thank you in advance for your help.
 

Taxing Matters

Overtaxed Member
I’m confused by some of the terminology regarding retirement accounts.

Rollover.
Transfer.
Distribution.
Withdrawal.

Questions:

Money taken from one IRA and put into an IRA in a different company is called a?
Money taken from an IRA and put into a 401(k) is called a?
Money taken from a 401(k) and put into a different 401(k) account within the same company is called a? (Some people have two 401(k) accounts within the same plan; money contributed by the employer and money contributed by the employee).
Money taken from a 401(k) and put into an IRA is called a?
Money taken out of a retirement account and put into a bank savings account is called a?

IRA refers to Traditional.

Thank you in advance for your help.
As far as tax law goes, a rollover of a retirement account is a direct transfer of funds from one financial institution to another; the account holder never touches the money. A withdrawal or distribution are the same thing: money is removed by the owner of the account in some manner. Some distributions are taxable, some are not. Rollovers are one example of nontaxable distributions. Thus, even roll overs are reported to the IRS as distributions by the institution from which the funds are taken out even though it goes to another institution as a rollover and not taxable.
 

LdiJ

Senior Member
I’m confused by some of the terminology regarding retirement accounts.

Rollover.
Transfer.
Distribution.
Withdrawal.

Questions:

Money taken from one IRA and put into an IRA in a different company is called a?
Is a Rollover. A Trustee to Trustee Rollover goes direct from one institution to another. Some rollovers go through the hands of the taxpayer. Those rollovers must happen within 60 days of the money being distributed to the taxpayer.

Money taken from an IRA and put into a 401(k) is called a?
That is also a rollover.

Money taken from a 401(k) and put into a different 401(k) account within the same company is called a? (Some people have two 401(k) accounts within the same plan; money contributed by the employer and money contributed by the employee).
That is also a rollover, although I have personally never heard of separate 401ks for employee contributions and employer contributions.

Money taken from a 401(k) and put into an IRA is called a?
Again that is a rollover.

Money taken out of a retirement account and put into a bank savings account is called a?
That is a distribution

IRA refers to Traditional.
No, there are traditional IRAS and Roth IRAS. IRA means "Individual Retirement Account".

A Transfer would generally indicate money in an IRA that was moved from one investment to another without being removed from the IRA.

A withdrawal and a distribution are two different words for the same thing...taking money out of a retirement account and putting it somewhere other than a retirement account.
 

Taxing Matters

Overtaxed Member
A withdrawal and a distribution are two different words for the same thing...taking money out of a retirement account and putting it somewhere other than a retirement account.
A distribution/withdrawal is taking any money out of the account for any reason, even if it is a roll over. That's why rollovers get reported on 1099 forms. As you pointed out, taking the money out of one qualified plan to another may be a roll over, it should be emphasized that it only counts as a roll over if it is completed within 60 days. If you know you want to do a roll over, a direct transfer from one account to the other is the preferred way to do it.
 

LdiJ

Senior Member
A distribution/withdrawal is taking any money out of the account for any reason, even if it is a roll over. That's why rollovers get reported on 1099 forms. As you pointed out, taking the money out of one qualified plan to another may be a roll over, it should be emphasized that it only counts as a roll over if it is completed within 60 days. If you know you want to do a roll over, a direct transfer from one account to the other is the preferred way to do it.
I absolutely agree with the bolded. I emphasize that to my clients whenever I have the opportunity to give them advice before they do it. Unfortunately, many of them don't think to ask for advice until AFTER they have done something.
 

Bali Hai Again

Active Member
That is also a rollover, although I have personally never heard of separate 401ks for employee contributions and employer contributions.

For instance I have a 403(b). Same 403(b) custodian with two accounts. One account for employer contributions RA (Retirement Annuity) and more restrictions for investing and loans, and, one account for employee contributions TDA (Taxed Deferred Annuity) with less restrictions for investing and loans. When separated from employment you can “roll over” the employer account into the less restrictive account and have more control. When I separated from employment I told the account rep. I wanted to “Transfer“ the employer portion to my account contributions and he advised that was a “rollover” and that’s how it was handled.

No, there are traditional IRAS and Roth IRAS. IRA means "Individual Retirement Account".

Yes, I meant Traditional IRA.
 

Bali Hai Again

Active Member
I absolutely agree with the bolded. I emphasize that to my clients whenever I have the opportunity to give them advice before they do it. Unfortunately, many of them don't think to ask for advice until AFTER they have done something.
I could not agree with you more. One must be extremely careful when moving tax deferred money and tell experts EXACTLY what you want to accomplish.
 

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