What Is a 1099-R Rollover?

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A 1099-R Rollover is the tax document the Internal Revenue Service needs filled out when someone moves or "rolls over" money from a financial vehicle such as a retirement account or insurance policy to a new account, because of a job change, death of a spouse or other reason. Whether the retirement account holder owes any taxes at the time of transfer or not, the IRS wants a record of the transaction.

What the 1099-R Covers

  • The 1099-R covers distributions from pensions, retirement accounts, profit-sharing plans, annuities, insurance contracts and survivor benefit plans. If there is a distribution, either to you or to "roll over" the money to a different custodian, the IRS wants to know. If the money is in a tax-deferred plan and it went straight from one custodian to another, generally no taxes will be withdrawn. But if you received the money, even just to move it yourself, there could be a penalty.

If You Handled the Money

  • If you receive the distribution yourself, 20 percent will be withheld when you receive the distribution. So if you had $10,000 in your account, you will only get $8,000. You have 60 days to put the $10,000 back in an account with a new trustee, but you will have to come up with the $2,000 on your own to put the full $10,000 in and meet IRS requirements to avoid penalty. The $2,000 won't be returned until you file your taxes.

If You Didn't Handle the Money

  • If you don't handle the money but let it go from one trustee to another, the IRS does not always require reporting. But if the particular transfer requires reporting, it's a simple matter of filling out the 1099-R, putting the amount rolled over in box 1 and the taxable amount in box 2a. Generally if you roll it over directly, the taxable amount will be zero. Box 7, the distribution code, explains why the money was moved and who got it. If you did not touch it, the letter that goes in the box is G.

What to Put on Your Tax Form

  • If you had a distribution rollover, you will have to file a form 1040 and report the distribution to the IRS in addition to filing a 1099-R. The space for reporting is generally between lines 11 and 16 on the 1040 form depending on what kind of distribution was made and how it was handled. If it was a direct rollover, write rollover in the space next to the box connected with your form of transaction.

References

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