Question

I have a question about rolling 401K into IRA and reporting 401K rollover into IRA. If my previous employer made me rollover my 401K into a traditional IRA, how should I report it?

Answer

401K rollover401K rollover funds are reported as distributions, even when they are rolled over into another eligible retirement account. An eligible rollover of funds from one IRA to another is a non-taxable transaction. Rollover distributions are exempt from tax when you place the funds in another IRA account within 60 days from the date of distribution.

Regarding rolling 401K into IRA, you should receive a Form 1099-R reporting your 401K distribution. Regarding reporting 401K rollover into IRA, how you report it to the IRS depends on the type of rollover.

If this was a direct rollover, it should be coded G. Enter the amount from your 1099-R, Box 1 on Form 1040, Line 16a. Enter the taxable amount from Box 2a on Line 16b. The Box 2a amount should be 0 for direct rollovers.

If you received a distribution check from your 401K, 20% in federal taxes might have been withheld from that check. Taxes withheld are reported on 1099-R, Box 4. You must roll over the check amount and the 20% within 60 days for the distribution to be tax-free. This applies even though you didn’t actually receive the 20% withheld. If you do this, you might get most of the withheld amount back in a refund when you file your taxes since it won’t be needed to pay the tax on the withdrawal.

Example: If your distribution is $10,000, you’d get a check for $8,000. However, you must roll over all $10,000 into the IRA or pay the taxes on the difference.

The amount you redeposit within 60 days is a tax-free rollover. This applies if this is the only rollover within a one-year period. The portion of the distribution you keep is taxable. You might be subject to an early withdrawal penalty unless a Form 5329 exception applies.

While you should have received a Form 1099-R reporting your rollover, if you didn’t, or if you failed to report the IRA when you initially filed your tax return, you can report your 401K rollover on a Form 1040X: Amended Return. Then, complete and file your amended return.

You do need to report this type of rollover to the IRS for tax purposes even though you aren’t required to pay tax on this type of activity. Reporting your rollover is relatively straight forward.

Where to Go For More Tax Help

For more assistance with figuring out the taxation associated with rolling over retirement savings accounts, get help! Learn about the many ways to file taxes with H&R Block.

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