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And it has been verified that ex did NOT remarry after the divorce?
And that the 401k plan did not terminate the spousal beneficiary designation when the divorce went final?

When's the Right Time to Take RMDs? by Christine Bentz, Morningstar I have a small inherited IRA and, in years past, I’ve elected to take an automatic withdraw in December. When I start RMDs on my retirement account I’m not sure which option I will choose. Right now leaning in favor of monthly as a “paycheck replacement”. There is no simple answer that works best for everyone. There are trade offs depending on how you personally assess the variables which include: 1) Whether your taxes are paid through withholding from the RMD, or some other method such as quarterly estimates. 2) Whether you prefer a one time RMD distribution or periodic distributions. 3) Whether you are making QCDs with their own timing issues relative to your RMD. 4) Whe...

CWRadio wrote: ↑Wed Mar 29, 2023 10:26 am Under the Secure Act 2.0 can the yearly payout of a qualified SPIA (purchased within a IRA) count towards your RMD for that year? Paul

Yes. Taxpayers have been assuming that this was the case prior to Secure 2.0. This just codifies the interpretation. And it does not resolve the problems of a total annuitization of all IRAs. Total annuitization would require an RMD distribution prior to annuitization for the difference between the RMD and what the annuity will pay out that year, which in turn is a function of how late in the year the annuity is purchased.

Hi there, I changed jobs in June. My new employer cut more 401k than max. allowed. So they got Fidelity to refund the overpayment. But my W2 box 12D till shows the old amount and my employer is not willing to correct the W2. Please confirm if I should manually correct the 12D W2 entry in Turbotax to show the new amount (after the refund) or should I leave it as is.Thank you. They should not change the W-2 as originally issued. Turbo tax should automatically add the excess deferral amount to your income on line 1h of Form 1040. Check to see if that occurred. And that should happen whether they returned the excess or not. If they had not returned the excess by 4/18 (adjusted for gain or loss), you would eventually have been taxed a second ti...

1) Yes 2) Yes, to an inherited Roth IRA, not to your own 3) No. Typically it is rolled to an inherited traditional, but you also have the option of rolling it to your inherited Roth IRA, incurring taxes. Note that inherited IRAs cannot be converted, but an inherited qualified plan can. 4) Both an inherited TIRA and an inherited Roth IRA. None of this can go into an owned IRA of any type. 5) You will still have to have the 401k create an inherited account under your SSN, then have VG pull the direct rollover into the inherited IRAs created at VG. Best to double and triple check any paperwork to make sure that the correct components go into the right accounts at VG. It is an absolute nightmare if they don't and VG reps often will not help yo...

No I don't believe TT did that for 2021 return. To illustrate, see below - Emp 1 - Wage $100,000, 401k $16,000 ---> Wages in box 1 = $84,000 Emp 2 - Wage $50,000, 401k $12,000 ---> Wages in box 1 = $38,000 IRS limit in 2021 $19,500 So the line 1 wages should have been $100,000+$50,000+($28,000-$19,500). It seems TT never considered that over-contribution for 2021. I have same situation last year and it seems they are adding over contribution back to wages. I am assuming I will have to amend 2021 return or show it in this years income by changing code P to 8 as described by tax act on the link below. https://www.taxact.com/support/1210/2019/form-1099-r-excess-401k-contributions Yes, 2021 wages should have been 158,500. Perhaps you did not e...

Sorry, I meant line 1. Is it included in the line 1 (wages) amount?

Hello Everyone, I inherited a 401k account from my mother last year, and I would like to move it to Vanguard. However, the 401k account contains a mix of contributions and I want to make sure I both understand how to move it and that my plan is solid. Below is the account breakdown, and in addition to that breakdown there is a small box on the statements that says "Your Nontaxable Balance: $5,500". Contributions & Earnings ___ Percent of Balance ____ Vested Percent Before-Tax ------------------------ 36% --------------- 100% After-Tax Post 1986 -------------- 36% --------------- 100% Company Match -------------------- 11% -------------- 100% Company After-Tax Match --------- 17% -------------- 100% Total ---------------------...

I had excess contribution in my 401k in 2021 due to mid-year job change. In 2022, I received two 1099-R with < Code 8 - Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2022 and Code P - Excess contributions plus earnings/excess deferrals taxable in 2021> TurboTax says that "Looks like you may need to amend your 2021 return. Your 1099-R reports earnings on a contribution you made in 2021." Do I still need to show both 1099-R's in my 2022 tax return even though the one with code P needs to go on 2021 with an amendment. Thanks! You probably had excess deferrals, not excess contributions. With excess deferrals, the 8 coded 1099R is for the earnings, and the amount in Box 2a goes on line 1h of your 202...

Doesn't The IRS 590 pub clearly state that no distribution is required before the 10 year closeout? 10-year rule. The 10-year rule requires the IRA beneficiaries who are not taking life expectancy payments to withdraw the entire balance of the IRA by December 31 of the year containing the 10th anniversary of the owner’s death. For example, if the owner died in 2022, the beneficiary would have to fully distribute the IRA by December 31, 2032. The beneficiary is allowed, but not required, to take distributions prior to that date. The 10-year rule applies if (1) the beneficiary is an eligible designated beneficiary who elects the 10-year rule, if the owner died before reaching his or her required beginning date; or (2) the beneficiary is a de...

Note that life expectancy beneficiary RMDs requirements are stated on p 11, but the following separate paragraph appears on p 12:

Payment under the 10-year rule.
If the IRA owner dies
before the required beginning date and the 10-year rule
applies, no distribution is required for any year before the
10th year.

So I inherited an IRA from my Dad in 2020. Wife inherited one this year. Both parents were over 80 years old. I have called Schwab and they are confused. My accountant says I have 10 years to withdraw both. I think I need to take a distribution this year for both. Schwab thinks I come under some type of lifetime rule but I do not think that applies here. Question - what is the minimum amount I have to take out this year? 10%? Thanks. I don't know why Schwab should be confused about this now, even though the IRS itself was confused for a couple of years. You both fall under both the 10 year rule, and you must take annual RMDs in years 1-9. However, because the IRS itself could not make up their mind for a couple years, they have waived any ...

I am also considering moving assets from my TSP to my Vanguard accounts. My TSP account contains regular TSP contributions and Tax exempt contributions ($31k), no Roth contributions. Is $31k the amount I can rollover to my Vanguard Roth IRA without tax implications? Also, on my Contribution Balances spreadsheet, there are three categories of contributions and earnings labeled "Traditional", "Tax-Exempt" and "Tax-Deferred Rollover". Am I correct in assuming the dollar amount ($77k) under the "Tax-Exempt" category is how much my original $31k has grown over time? What does the "Tax - Deferred Rollover" dollar amount ($24k) refer to? Thanks Did you roll over an IRA or employer plan into the TS...

Stoic9 wrote: ↑Fri Mar 24, 2023 12:16 pm My TSP contains regular TSP contributions, Roth Contributions and Tax exempt contributions. How are these handled when rolled over to a T-ira?

I have both a Traditional IRA and a Roth IRA established outside the TSP.

You would need to do a split direct rollover, with the entire Roth TSP balance and the after tax (tax emempt) balance rolled to your Roth IRA. Be very careful that none of these balances are rolled to your TIRA. Only the pre tax TSP balance which includes gains on the tax exempt contributions is rolled to your TIRA. Both of these rollovers should be non taxable.

I assume that military employment was the source of the tax exempt contributions.

My DH has a pension he receives by monthly payments (not a lump sum annual payment). Approximately $75K per year. Is it possible/do-able to roll this over to a ROTH IRA? We do not need the money. If so, how do we do this? I am not able to find the answer via google. TIA! These payments cannot be rolled over to any type of retirement plan. The reason is that they fall under an exception to the definition of an "eligible rollover distribution" per Sec 402(c)(4) of the tax code copied below: (4)Eligible rollover distribution For purposes of this subsection, the term “eligible rollover distribution” means any distribution to an employee of all or any portion of the balance to the credit of the employee in a qualified trust; except th...

EJ may require you to set up 2 inherited IRA accounts as an internal requirement, but there is no reason that you should need more than one inherited IRA account at the new custodian to receive the balances from the 2 accounts at EJ.

If the decedent was subject to RMDs and did not complete the year of death RMD, you are responsible for completing it, and can do that from the inherited IRA at the new custodian. Be sure you know your beneficiary RMD requirements under the Secure Act. If any questions, please post with DOB and DOD of the plan owner.

I'm aware of how I have to do the withdrawals from previous questions here and a very useful Morningstar article. My only question was the actual process of doing the withdrawal. Do I just make the withdrawals and then submit paperwork to the IRS next April? Or do I need to do something else? Request the distribution, and you will get a 1099R next January showing the amount distributed. This simply goes on lines 4a and 4b of your 1040 like any other IRA distribution. There is no separate form or schedule to be added in most situations. However, if the inherited IRA included non deductible contributions made by your father, you inherited those amounts and you would need Form 8606 to break out the already taxed amount. This will reduce your ...

paramedic wrote: ↑Sat Mar 18, 2023 7:30 pm Hi everyone!

I reached out to a Vanguard rep through work, and after 3 days of him researching the options, he advised that they were able to reclassify it for me. This has now reflected online. Thanks again for the advice.

Good news. I assume you also checked your on line account to verify that the contribution shows up as a regular contribution for the correct year (2023).

When the 1099R for 2023 is entered into a tax program, the taxable income should show up on line 1h of Form 1040. Prior to 2022 it was added to line 1 wages, but Form 1040 now breaks out the wage income into several components that get different treatment.

These amounts should never show on lines 5a and 5b (plan distributions) of your 1040. If they do either the 1099R or the entry of the 1099R data is incorrect.

Sec 72(q) lists all the NQ annuity penalty exceptions: (q)10-percent penalty for premature distributions from annuity contracts (1)Imposition of penalty If any taxpayer receives any amount under an annuity contract, the taxpayer’s tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income. (2)Subsection not to apply to certain distributions Paragraph (1) shall not apply to any distribution— (A)made on or after the date on which the taxpayer attains age 59½, (B)made on or after the death of the holder (or, where the holder is not an individual, the death of the primary annuitant (as defined in subsection (s)...

What are the benefits of an MBR even if we are only allowed to do in plan conversions instead of the option of in service distributions? My plan is to roll that money to a Roth IRA once I leave the company (although I think - plz confirm) that I would be taxed on the earnings once I did that. 1) Should I still contribute to the MBR in my circumstances even though I don't have the option to do in service distribution to IRA? What are the pros/cons? Yes, but perhaps not as much if there is a decent chance you will need to tap this money while still working there. Or if the plan offers loans, you might apply if the need is that great. 2) Once I leave my company in 5-10 years, should I still roll that money to an IRA even if taxed on the earni...

Note all the penalty exceptions on the following IRS rollover chart, second column: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions Every one of these exceptions will waive all or part of the 10% penalty for distributing taxable portions of a Roth conversion in the first 5 years or for distribution of Roth gains. Age 59.5 is the predominant exception, but disability and several other exceptions apply that can be claimed on Form 5329. Secure Act 2.0 also eliminates the penalty on all gains distributed with returned IRA contributions by the due date. This is effective immediately, even if the returned contribution is for 2022. Of course, now that we all have losses, the penalty is wa...

Does your spouse face a similar issue?

Are you sure that filing MFS is a net benefit and the reasons for doing so at first still exist? If not, you can amend prior returns to MFJ and avoid all this. In addition, you might get refunds.

Hey guys my wife has 2 smaller 401k accounts from pervious employers. With typical 401k account fees should I roll these into something else or should I let them alone. The accounts have been holding their own and doing pretty well but I was thinking long term with 401k fees. Thanks for your advice. A financial advisor told me a few years ago to not worry with rolling them anywhere and just don't forget about them basically. Just getting everyone's opinion. If any of these accounts are less than 7000 in value, I would consolidate them into her current plan or an IRA if she tends to have shorter term jobs. Sec 304 of Secure Act 2.0 increases the old limit for mandatory distributions a plan can require from 5000 to 7000 effective in 2024. To...

Thank you! Thank you! Thank you! So glad I won't have to talk to Vanguard again on this. I also had excess contribution for mine for 2021 but since I hadn't made my 2022 contribution I used the 2021 for mine. I know I too will have to fill out a 5329 and pay the 6% excise. Can we do that on one 1040X as married filing jointly or will we each need to do one? We actually probably had losses since it was in a GNMA account, but will just be glad to get this behind us. For late corrections of excess contributions, Form 5329 includes the two options of correction by distribution (husband on line 20) and absorption (you on line 19). So he is using one method and you the other method. But since you are not taking a distribution, only his distribut...

The subject of taxpayer "elections" with respect to various distribution options has never been clearly spelled out by the IRS. These elections (eg spousal ownership assumption, LE vs. 5 or 10 year rule, and now EDB election into the 10 year rule) are made with the plan custodian in a form and time limit that may or may not be clearly stated in the plan document. While IRS contracts are similar, qualified plans often contain more restrictive measures than the IRS allows, including election mechanisms. The following is copied from IRS Reg 1.401(a)(9)-3, QA 4: (c) Elections. A plan may adopt a provision that permits employees (or beneficiaries) to elect on an individual basis whether the 5-year rule in section 401(a)(9)(B)(ii) or th...

IRA basis is a dollar amount.

1) If the total IRA values declines due to investment results and you then convert, your basis will be a higher % of the conversion and you will owe less tax on the conversion. You will have less basis remaining for future years in this situation per line 14 of Form 8606.

2) If total IRA values increase due to investment gains and you convert, your basis will be a lower % of the conversion and the taxable portion of the conversion will be higher. You will have more basis remaining for future years due to these gains per line 14 of Form 8606.

If you withdraw the entire balance of all your Roth IRAs (eg 6000) and the distribution is less than your contributions (eg 7000): 1) If your Roth is qualified (5 years and 59.5), you would report the amount distributed (6000) only on line 4a of Form 1040. 2) If your Roth is not qualified, Form 8606 would be required. Enter 6000 on lines 19 and 21, and 7000 on line 22 and 0 on line 23. Then enter 6000 on line 4a of Form 1040. You still have a 1000 regular Roth contribution basis left to apply if you contribute to a Roth (or convert) in the future. Prior to 2018 the loss of 1000 upon total closure of all Roth accounts was eligible as a misc itemized deduction subject to 2% of AGI floor for all such misc deductions. But this deduction was sus...

Made an excess contribution to husband's Roth in 2021. Didn't realize it til December 2022. Filled out the form on Vanguard to have it removed in December 2022. They did it but just looked closely at the 1099 and they coded it as Q Qualified Distribution from IRA plan instead of 8 Excess distributions plus earnings/excess deferrals taxable in 2022. I called them this morning but they wouldn't talk to me without his permission. Am I doing this right? Is there anything I should ask them tomorrow when I call again? I wish I could just go to our local IRS office and ask them to walk me through everything. I feel like I'm over my head. Is it time to just go dump it all on an accountant? I was getting ready to fill out the 1040X but guess I will...

OP here. Sorry for any confusion. Account Titles at EJ are as follows. Statements for all three are mailed as one portfolio listed as "Portfolio for dead son's name" at top and addressed to dead son c/o 90 year old's name. Individual Retirement Account Select--dead son's name $331K (later called in EJ Documents Traditional IRA and Edwards Jones Trust Co As Cust/FBO dead son IRA C/O 90 year old) Single Account Select--90 year old's name $171K (later called in EJ documents "Single, TOD-Select") Individual Retirement Account Select-90 year old's name 19K (later called in EJ Documents Traditional IRA and "Edwards Jones Trust Co As Cust/FBO 90 year old's name IRA) At the top of each page under account holder dead son is...

Andrew321 wrote: ↑Tue Mar 14, 2023 6:21 pm Thanks so much! For ease of account management, can he roll this over into a traditional IRA?

Yes, anytime he wishes he can transfer the SEP balance into another IRA. Suggest direct transfer, not a 60 day rollover.

Long story short two jobs over allocated 2022 401k by around $1400. I noticed the error in early February 2023 so no big deal. Contacted employer and Fidelity to remove the excess contribution and that went well. Now this is where it gets interesting. Fidelity sent a check for around $1200. They then sent a letter stating the difference was because of losses on the contributions. It also said I’ll get two 1099-R in 2024. One showing the excess withdrawal and a second the loss. It said I should add the $1200 to my 2022 taxes as misc income, can then take the $200 loss as a subtraction from misc income on my 2023 taxes, and ignore the 1099-R. To me that sounds kind of weird and double dipping on the loss. Anyone else ever deal with this befo...

Almost there wrote: ↑Fri Mar 10, 2023 6:10 pm Never mind, I figured it out.

Almost there

Yes. An RMD is not reported by the custodian on Form 1099R any differently than any other distribution.
And you report the distribution on Form 1040, lines 4 or 5, just like any other distribution.

(b) Recharacterizations. If an amount is contributed to a Roth IRA that is a conversion contribution or failed conversion contribution and that amount (plus net income allocable to that amount) is transferred to another IRA (transferee IRA) in a subsequent year as a recharacterized contribution, the recharacterized contribution (plus allocable net income) must be added to the December 31 account balance of the transferee IRA for the year in which the conversion or failed conversion occurred. Therefore, RMDs or line 6 of Form 8606 when applicable should be based on the actual amount transferred back to the TIRA. There should be no attempt to calculate an imputed amount for the 12/31 value. So to use a real life example (mine!)... If the ori...

Thanks to everyone for the feedback! I feel better now about my plan to calculate the attributable income for 12/31/22, as if the recharacterization had occurred on that date. todthebod's quote from the form's instructions -- "Treat any recharacterized IRA contribution as though the amount of the contribution was originally contributed to the second IRA, not the first IRA." -- certainly seems to indicate that's a safe course of action, in the absence of any explicit instructions specific to this situation. And HeelaMonster, I'm grateful my lot is much simpler than yours! Form 6806 has almost done me in, too, and it's only been an hour or two for me.... :annoyed There are instructions in the Regs, but they were framed in the conte...

boater07 wrote: ↑Thu Mar 09, 2023 6:35 pm I would like to move TIRA assets to my Roth. Trying to figure out
how to coordinate with my RMDs. I usually do them late in the year
and want to do the rollover sooner.
Can I just pay tax on the transfer and do the rmd later?

No. You must complete the total RMD for all your TIRAs before converting any amount.
The reason being that the first distribution is deemed to apply to the RMD - and an RMD is not eligible for rollover. A conversion is a rollover. It does not matter when in the year you take your RMD, but you must complete it before converting.

I made a mistake. In early 2022, I made a prior year (2021) tIRA contribution. I meant to make a 2022 Roth IRA contribution. A few days later, I noticed the mistake... it had lost $8 in value by then. I made a recharacterization of the contribution from 2021 to 2022. A few days later, it had lost another $2 in value. I then did a full Roth conversion. My 1099-R shows the recharacterization and conversion. Neither should be taxable. My tax software says that the 2021->2022 recharacterization should be on an amended 2021 return. Do I need to go back and amend that return and add the contribution followed by the recharacterization? Or just leave it alone since nothing is taxable? To be clear, an IRA contribution year cannot be changed by rech...

If you overpaid your 2019 taxes, you only have 3 years from the date you filed your 2019 to file a 1040X and receive a refund. If you miss that deadline, the overpayment for 2019 is lost.

Covid exploded in March, 2020 and the tax due date was extended to 7/15, but when the IRS actually received your 2019 return is when the 3 year clock for amended return refunds starts.

Corrections of flawed 8606 forms always starts with the first year, since these forms are cumulative. But your deadline for 2019 may be very close, or if you filed early (like you contributed early), it may already be too late to secure the refund.

They can reclassify if the request is timely and no reporting has been done. They have done this many times before, but they are inconsistent.

In this case, you obviously can still make a 2023 contribution (even a 2022 contribution), and Form 5498 has not been issued for either year. You might tell VG that reclassification will save both of you the cost of processing and reporting the removal of an excess contribution.

In this situation it should not matter who was at fault for this error.

The chance of the IRS requesting documentation from you is somewhere between slim and nil, probably closer to nil.

The IRS has all the 5498 forms reporting your contributions so they can easily see that the 5 year holding period has been met.

I had two jobs in 2022 and contributed more than $20,500 to my 401(k) plans. I realized this in the middle of 2022 and reported it to the plan sponsor of my current job. The excess contribution was $2,000. I received the following: 1. Check for $1,900. 2. Letter explaining there had been a $2,000 over contribution with a $100 investment loss. 3. 1099-R for $1,900 with distribution code 8. 4. W2s showing a total deferral of $22,500. I am not sure how to report this on my taxes using turbotax. I added the 1099-R to turbotax and it added the $1900 to form 1040, line 1h. I am not sure if this is the correct way to report the excess deferral. I am worried the W2s sent to the IRS will show a $2,000 over contribution, but my 1040 will only show a...

These vague statements have been a continuing complaint by participants. The DOL should require that a clear breakdown be provided at the end of each plan year. That includes the cost basis of any employer shares eligible for NUA. Knowing how much of the balance is was distributable at year end (eg. rollover sub accounts) would also be helpful.

W-2 forms for each year provide coded breakdowns of pre tax and designated Roth elective deferrals, but that's entirely different than the actual total balance breakdown, particularly for long term employees where the balance is more affected by investment returns.

Presuming that MIL wants to increase her current income (and potentially reduce her estate) by buying a SPIA, I think that your plan is fine. Especially if her tax rate is lower than that of her heirs, it makes sense to fund the SPIA from an IRA. I have purchased an annuity with some of the funds in my Vanguard IRA. As a part of the annuity application process, MIL will sign an authorization for the insurance company to “pull” the premium from the IRA. Thank you, that is helpful. Is the premium that is pulled from the IRA just considered a rollover with no tax consequence? If the IRA annuity is purchased this year the 2023 RMD is known. She would subtract the annuitized payments received in 2023 from the total RMD and take the remainder fr...

Sec 327 of Secure 2.0 will provide for the surviving spouse beneficiary to elect to be treated as the owner, and therefore use the Uniform Table for RMDs.

But this provision does not go into effect until 2024.

6.6 is the correct single life table divisor for age 88.

While she could do a direct rollover to her own IRA, the 2023 RMD would have to be distributed first. Then starting in 2024 she could use the Uniform Table for her IRA RMD. Therefore, only 2023 would be subject to the higher RMD from the single life table.

The following is an IRS page explaining use of these forms:

https://www.irs.gov/forms-pubs/addition ... p-and-w-4r

For non periodic distributions where you might change your WH from distribution to distribution or from year to year, these firms should provide the phone or a website option to elect your WH%. You should not have to submit a paper form.

If you choose to roll over the loan offset amount or any portion of it, be sure to report the rollover contribution type (loan offset) to the IRA custodian because the IRA custodian must report these rollover contributions on Form 5498 with code "PO" entered in Box 13c.

The 1099R issued by the 401k should be coded M in Box 7. The IRA matching program will then compare the amounts from Form 5498 coded "PO" with 1099R forms coded M. If these forms are not issued correctly, an IRS inquiry is likely to follow.

So be sure to clearly ID rollover contributions of a loan offset with your IRA custodian.

Look how much time you have to use other money or savings accumulated over the next several months to complete a rollover of the defaulted loan. From the IRS site: What is a plan offset amount and can it be rolled over? A plan may provide that if a loan is not repaid, your account balance is reduced, or offset, by the unpaid portion of the loan. The unpaid balance of the loan that reduces your account balance is the plan loan offset amount. Unlike a deemed distribution discussed in (5), above, a plan loan offset amount is treated as an actual distribution for rollover purposes and may be eligible for rollover. If eligible, the offset amount can be rolled over to an eligible retirement plan. Effective January 1, 2018, if the plan loan offset...

And because it is taxable compensation he can make a 2023 IRA contribution, and if you are not working a spousal contribution for you.

OK, now I'm really confused. :confused I received the corrected 1099-R. It now has two lines of data inside each box. Box 1 shows $13,747.00 on the first line, with a code P distribution code in box 7. It shows $6873.50 on the second line, with a code 08 in box 7. What is the purpose of that first line showing $13,747? It's exactly double the amount that I withdrew in 2022. Why is it necessary? Couldn't Vanguard have just issued a corrected 1099-R with the code 08 in box 7 instead of the code P they first showed? I guess I need to show two separate 1099s in TurboTax, one for each line's info, right? The second line is correct and what they should have issued the first time. You are correct that normally the two lines should be treated as t...