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How do you reflect an IRA distribution in 2020 that was returned within the prescribed time period

safcpa
Level 2
 
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9 Replies 9
sjrcpa
Level 15

Indirect rollover, unless you are referring to returning a COVID related distribution to which my answer is I don't know.


ex-AllStar
qbteachmt
Level 15

Was the money returned "as if it never happened" (rollover) or do you mean within the 3 years?

Q7. May I repay a coronavirus-related distribution?

A7. In general, yes, you may repay all or part of the amount of a coronavirus-related distribution to an eligible retirement plan, provided that you complete the repayment within three years after the date that the distribution was received. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct trustee-to-trustee transfer so that you do not owe federal income tax on the distribution.

If, for example, you receive a coronavirus-related distribution in 2020, you choose to include the distribution amount in income over a 3-year period (2020, 2021, and 2022), and you choose to repay the full amount to an eligible retirement plan in 2022, you may file amended federal income tax returns for 2020 and 2021 to claim a refund of the tax attributable to the amount of the distribution that you included in income for those years, and you will not be required to include any amount in income in 2022. See sections 4.D, 4.E, and 4.F of Notice 2005-92 for additional examples.

From: https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

https://www.irs.gov/pub/irs-dft/i8915e--dft.pdf

 

 

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safcpa
Level 2

It was the RMD returned before August and it looks like you record it as a rollover with a G as distribution type regardless of what the 1099-R has which in myu case was a 7 for normal distrribution.

Thanks for the replies

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qbteachmt
Level 15

"as a rollover with a G as distribution type"

You stated they got it, then redeposited it. The G is for Direct Transfer, not Rollover by the account owner. You have a 7, then indicate it was a rollover, as usual with any rollover. Because they did it by the August date, it is a qualified rollover.

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safcpa
Level 2

Thank you. I have not had an indirect rollover before

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cpaathome
Level 1

I'm still confused by this answer.  I'm in the same situation with a taxpayer who took her RMD early in the year and then wrote a check to return it in July.  So it's a qualified rollover, but she has a 1099 R showing it's taxable.  She also has a 5498 showing the rollover.  So it's correct to input this in Lacerte with a code of G??  Or is there another way to back it out somewhere else?

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qbteachmt
Level 15

"but she has a 1099 R showing it's taxable."

Because a 1099-R is the money Out. All they knew was, she took out funds. They have it as taxable, because they don't know about any condition for what she did, afterwards.

"She also has a 5498 showing the rollover."

The 5498 is for money In. As long as you confirmed this meets the requirements as a nontaxable distribution due to timeliness and account type for the deposit and that is the Gross distribution, you continue on with your entry, regardless of the 1099-R.

"So it's correct to input this in Lacerte with a code of G??"

If that 1099-R has a G, you input the G. If it has something else, you input that something else. You are not preparing the 1099-R; you are referencing it.

"Or is there another way to back it out somewhere else?"

 

https://proconnect.intuit.com/community/individual/help/individual-form-1099-r-frequently-asked-ques...

 

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safcpa
Level 2

I believe that you should not use the "G" because it doesn't technically meet the definition

In the distribution input Screen13.1 about half way down is a section called indirect rollovers and I used the first line which says "To other than a Roth IRA" and I got the result I wanted

qbteachmt
Level 15

"I believe that you should not use the "G" because it doesn't technically meet the definition"

There is a G code for the 1099-R. There might also be a G as a Program Code for the form you are working on. Let's not treat these as the same purpose or function.

"called indirect rollovers"

Yes, and you also need to handle if that is Gross or Net.

"took her RMD early in the year and then wrote a check to return it in July."

Because any withholding that was not "made up" as part of the re-deposit means there is a Taxable Distribution still with the Feds = as withholding, and the total was Not rolled over.

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"Level Up" is a gaming function, not a real life function.