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My client had a dog walking/care business until March 2020 when, because of coronavirus, discontinued the business for the remainder of year 2020. He also converted 40,000 from a traditional IRA to a Roth IRA in year 2020 (20K in October, 20K in December)
Tax was withheld on the conversion at 10%, resulting in in two 1099R's from the custodian; one showing a taxable distribution of $39600 with no tax withheld, the other showing a taxable distribution of $4400, with $4400 tax withheld.
My client now feels he can afford to pay tax on the conversion, from funds outside the IRA and wishes to repay the $4400 before filing year 2020 tax return. We've called the custodian a couple of times on this; the first custodian rep said the custodian would treat as a contribution, and the repayment of $4400 should be journaled/noted as CRD repayment.
When we called the custodian a second time, the second rep said we were actually doing a rollover, and could only do the rollover online, and saw no need for notation on the $4400 repayment.
As we are outside the 60 window for a rollover involving IRA holder actually receiving funds, I don't see how this $4400 repayment could be considered a rollover. Wouldn't entering the $4400 repayment on tax return as a rollover preclude use of Form 8915-E, which I think is actually appropriate for this situation?
Also, wouldn't Form 5498 coming out in year 2022, for this 2021 $4400 repayment show it as a rollover? I am wondering if it wouldn't be best to me to wire $4400 repayment as a contribution, and notate on the wire that it is a CRD repayment?
Any and all thoughts/suggestions greatly appreciated?