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Reporting 401(k) and IRA rollovers

Your full company retirement plan distribution goes on line 12a if you file Form 1040A, on line 16a if you use the long Form 1040. The taxable amount -- zero for direct rollovers, since you are not taking out the money -- then goes on line 12b or line 16b. Be sure to write "rollover" next to the amount.

The same process is used if you move IRA accounts, say to consolidate multiple accounts or get a better return on your retirement investment. For reporting purposes on your tax return, an IRA includes a traditional retirement account; a Roth IRA; a simplified employee pension IRA, or SEP IRA; or a savings incentive match plan for employees account, or SIMPLE account.

You'll get a 1099-R for your IRA transfer and will report the transaction on lines 11a and 11b of the 1040A or 15a and 15b of the 1040. Again, write "rollover" on your tax return.

Don't touch the money

Because you transferred your retirement account from one plan manager to another, reporting the move to the IRS is simple. Trustee-to-trustee transfers, noted by the G code on the 1099-R, are generally nontaxable events. The money goes from one account manager to another, never in your hands to be viewed by the IRS as taxable income.

However, if you had opted to take the money yourself, 20 percent of your account would have been withheld. For example, if you had $10,000 in your 401(k), $2,000 was withheld when you took the distribution, meaning you actually got only $8,000.

The IRS gives you 60 days to redeposit your distribution into another retirement account and maintain tax-deferred status. But even if you do that, it will cost you upfront cash.

To ensure that your entire account meets IRS regulations, you must come up with the withheld $2,000 from some other source to make your rollover contribution equal to the original $10,000 distribution.

You'll get that $2,000 back when you file your taxes. It will show up in box 4 of the 1099-R you (and the IRS) will get detailing your withdrawal. You'll count that withheld amount on your return and, depending on your other tax payments, will come back to you as a refund or be applied toward the overall tax bill that you owe.

In the meantime, however, by taking out the money yourself, you've given Uncle Sam free use of your two grand.

If you directly transferred your pension money last year between trustees, you're in good tax shape. The details on Form 1099-R will help prove you continually maintained your account's tax-deferred status.

And if you move your retirement money this year, make sure it's a trustee-to-trustee transfer -- and look for that supporting 1099 next year.


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