Received a 1099-R Form Late

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
kareysue
Posts: 45
Joined: Fri Oct 10, 2008 10:07 pm

Received a 1099-R Form Late

Post by kareysue » Fri May 11, 2018 8:14 pm

I received a 1099-R Form with several thousands dollar under Gross Distribution box 1 and the box 2b taxable amount not determined and distribution code T.
Basically I complained to my broker asserting that the 2018 distribution was suppose to be for tax year 2017. They told me they won't fix it and to leave it as is. And then in 2019 I will get the 1099-R. Then today I receive a letter in the mail with a 1099-R for tax year 2017. They said they will do me a favor and file it for 2017 even though they told me months ago they will not. The distribution check was not sent out until Feb of 2018. As a result, I will need to file an amendment to my taxes. But my accountant told me it is better to wait for a CP2000 from the IRS rather than do an amendment because he will charge me a huge fee to do an amendment and since my 1099-R does not involve any new tax liability (since the distribution is from a Inherited Roth IRA account past down from the mother) I won't have to worry and I can explain later. What do you guys think it is the best option? I can continue to argue with the brokerage firm but they seem to ignore my calls.

Silk McCue
Posts: 849
Joined: Thu Feb 25, 2016 7:11 pm

Re: Received a 1099-R Form Late

Post by Silk McCue » Fri May 11, 2018 8:38 pm

Since it is a Roth account and has no tax liability I’d follow the accountants advice. Don’t bother with the broker because making a change again may just cause more headaches.

Sorry for your troubles.

Cheers

Alan S.
Posts: 7501
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Received a 1099-R Form Late

Post by Alan S. » Fri May 11, 2018 11:07 pm

kareysue wrote:
Fri May 11, 2018 8:14 pm
I received a 1099-R Form with several thousands dollar under Gross Distribution box 1 and the box 2b taxable amount not determined and distribution code T.
Basically I complained to my broker asserting that the 2018 distribution was suppose to be for tax year 2017. They told me they won't fix it and to leave it as is. And then in 2019 I will get the 1099-R. Then today I receive a letter in the mail with a 1099-R for tax year 2017. They said they will do me a favor and file it for 2017 even though they told me months ago they will not. The distribution check was not sent out until Feb of 2018. As a result, I will need to file an amendment to my taxes. But my accountant told me it is better to wait for a CP2000 from the IRS rather than do an amendment because he will charge me a huge fee to do an amendment and since my 1099-R does not involve any new tax liability (since the distribution is from a Inherited Roth IRA account past down from the mother) I won't have to worry and I can explain later. What do you guys think it is the best option? I can continue to argue with the brokerage firm but they seem to ignore my calls.
A distribution issued in 2018 cannot be reported on a 2017 1099R, and it is not clear why the brokerate re issued it for 2017. There must be more to this story. Was this an inherited Roth RMD that you requested in 2017 and the broker lost your request, or perhaps had you signed up for some RMD service offered by the broker? I wonder why else they would have issued that 2017 1099R.

As an inherited Roth IRA, had your mother made her first contribution prior to 2013? If so, the 5 year holding period was satisfied and your distribution is non taxable and reported only on line 15a of Form 1040. Form 8606 is not needed. Filing a 1040X to explain this is very simple and certainly does not justify much of a fee. Still, unless you want to file the 1040X yourself (we could provide assistance), you could wait for the CP 2000, but the IRS may assume your distribution is taxable since Code T means that the custodian does not know if the 5 year period has been met.

kareysue
Posts: 45
Joined: Fri Oct 10, 2008 10:07 pm

Re: Received a 1099-R Form Late

Post by kareysue » Sat May 12, 2018 1:10 am

They issued in 2017 because I sent it in 2017. They originally told me I past the deadline then they told me they won't issue the 1099-R but they issued it anyways today which is 1 1/2 months after the due date. In reality it is simple to do but the CPAs has a required minimum fee of $500 if i do anyamendment

Even if the CP2000 is issued since this is a T couldn't I justify it as a non-taxable distribution. If they do reject is what would penalty be That is what I am afraid of, but if I do that how would it prove it that it was over 5 years. Also, since this does not affect tax liability any downside to waiting for a CP2000 and explaining later

User avatar
celia
Posts: 7709
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Received a 1099-R Form Late

Post by celia » Sat May 12, 2018 1:46 am

Just sit there and do nothing. The ball is in the IRS's hands.

This is what I think will happen: the IRS is still processing the return they received. When they get done, they will add this new 1099-R to your return and send you a notice. They will likely ask how long the original Roth had been open (but they really mean did your MOM have a Roth open for at least 5 years). Any Roth will do, not just the particular one you inherited from. If your mom inherited it from her husband, then the question really is if HE had a Roth for 5 years.

So just sit there and one day within the next 2 years they may notify you. If they don't, don't worry about it since they already might know the history of the original Roth (as far as contributions and distributions are concerned, but don't care what assets were in the Roth). All custodians have to report this to the IRS each year for each IRA, even if there was no activity in the account.

If they do contact you, I doubt they will want an amended return, just a statement that the original Roth was opened over 5 years ago (if that is true, of course). If it was opened less than 5 years ago, it gets a little complicated since a small tax might be due.

Save the new 1099-R with your copy of the tax return and add a note about this situation. You could instead just print out this thread if you want since in a year or two it will be easy to forget what exactly happened. If you feel like doing something more, bookmark this page so that you can return to it in a year. If something else happens, we would love to hear about it. :sharebeer

kareysue
Posts: 45
Joined: Fri Oct 10, 2008 10:07 pm

Re: Received a 1099-R Form Late

Post by kareysue » Sat May 12, 2018 2:17 am

Thanks you are helpful. Yes it was with scottrade but they merge with ameritrade so I am not able to print out the statements since it has been so long. The ROTH IRA was indeed opened back in 2004 or 2005 I believe
Thanks for your help. You are a good relief

aqan
Posts: 334
Joined: Fri Nov 06, 2015 7:07 am

Re: Received a 1099-R Form Late

Post by aqan » Sat May 12, 2018 5:39 am

If they sent it to you late, most probably they reported it to IRS late as well. So why not let IRS decide if it wants you to amended your return or not.

Alan S.
Posts: 7501
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Received a 1099-R Form Late

Post by Alan S. » Sat May 12, 2018 10:04 am

kareysue wrote:
Sat May 12, 2018 1:10 am
They issued in 2017 because I sent it in 2017. They originally told me I past the deadline then they told me they won't issue the 1099-R but they issued it anyways today which is 1 1/2 months after the due date. In reality it is simple to do but the CPAs has a required minimum fee of $500 if i do anyamendment

Even if the CP2000 is issued since this is a T couldn't I justify it as a non-taxable distribution. If they do reject is what would penalty be That is what I am afraid of, but if I do that how would it prove it that it was over 5 years. Also, since this does not affect tax liability any downside to waiting for a CP2000 and explaining later
I think you are saying that you requested a distribution in 2017 (probably before Christmas) and the Roth custodian mishandled it and therefore agreed to issue a corrected 2017 1099R. Custodians do not do this unless they are close to 100% at fault, and will not do it if you waited until the last week of the year during the Holiday rush to request a distribution. If the actual situation differs, please advise. I am just interested in why the custodian eventually agreed to do this.

As for the T code, the IRS 8606 Inst are clear. Form 8606 (specifically line 19) is not to be completed if the decedent made their first contribution up to 2012. That means the entire distribution is non taxable. Unfortunately, many custodians issue a T code even when a Q (qualified ) code is clearly applicable because their policy is not to issue a Q code. The IRS knows this, but any given examiner could still make an inquiry, and are probably more likely to do so when line 15a does not show the distribution.

So this comes down to how much waiting for a couple years bothers you, and the prospect of getting a late IRS inquiry. Some people don't mind at all, and others are more comfortable if they eliminate this question now while the issue is fresh in their minds.

spectec
Posts: 1086
Joined: Mon Jul 14, 2014 8:00 am

Re: Received a 1099-R Form Late

Post by spectec » Sat May 12, 2018 10:20 am

The problem is there is no way to definitely eliminate the question because it is unclear what has been sent to IRS (maybe even nothing made its way to IRS). So the more you stir the pot with IRS and/or the broker, the greater the chance of multiple misunderstandings. You could wind up with dueling notices.

Since there will be no change in the tax liability, I vote with putting thorough notes in your files and doing nothing for now. If you get any correspondence from IRS in the next 2 years, just reply to it with the facts. If you hear nothing after 3 years, the issue disappears anyhow.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

kareysue
Posts: 45
Joined: Fri Oct 10, 2008 10:07 pm

Re: Received a 1099-R Form Late

Post by kareysue » Tue May 15, 2018 1:19 pm

I just got a notice today from custodian
they said will do a new 1099-r with a removal of excess. They will reclassify the $5000 contribution to 2018.
I was wondering if they were to do this would they properly do it? Would they do a corrected 1099-r with a $0 amount?

User avatar
Pajamas
Posts: 5084
Joined: Sun Jun 03, 2012 6:32 pm

Re: Received a 1099-R Form Late

Post by Pajamas » Tue May 15, 2018 1:54 pm

kareysue wrote:
Tue May 15, 2018 1:19 pm
I was wondering if they were to do this would they properly do it? Would they do a corrected 1099-r with a $0 amount?
What was the custodian's response when you asked them these questions?

Alan S.
Posts: 7501
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Received a 1099-R Form Late

Post by Alan S. » Tue May 15, 2018 4:15 pm

kareysue wrote:
Tue May 15, 2018 1:19 pm
I just got a notice today from custodian
they said will do a new 1099-r with a removal of excess. They will reclassify the $5000 contribution to 2018.
I was wondering if they were to do this would they properly do it? Would they do a corrected 1099-r with a $0 amount?

How did this situation morph into an excess contribution? The first post referred to a 1099R reporting a distribution. Did you actually make a contribution to an inherited Roth IRA? You can't do that, and if you did it would be an excess contribution.


Or perhaps there is more than one IRA account here?

kareysue
Posts: 45
Joined: Fri Oct 10, 2008 10:07 pm

Re: Received a 1099-R Form Late

Post by kareysue » Tue May 15, 2018 4:35 pm

I apologize for using the incorrect terms. No contribution was done to the Inherited roth ira. Just that the distribution was done in 2018 but they marked it as 2017. So now they said they will correct it and put it back the way it was before. what they sent out was an error. One rep told me to send in a "removal of excess" form (https://www.tdameritrade.com/retail-en_ ... DA1401.pdf) The purpose of the form is to have the distribution done in 2017 to be reclassify as 2018. (It should have 2018 to begin with since the check date was Feb 2018)

Another rep told me to do nothing and they will fix it internally. So not sure if that form is even right. I don't plan on doing anything and prefer to have them fix it internally, but in case they later claim they won't do it, I am not sure if filling out that form would be the right thing to do even if they request it.
Only 1 inherited roth ira and sorry for all the confusion but I appreciate your great advice everyone

Alan S.
Posts: 7501
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Received a 1099-R Form Late

Post by Alan S. » Tue May 15, 2018 5:16 pm

OK, is this correct?

1) You requested a distribution in 2017 (perhaps the inherited Roth RMD?), but the custodian did not make the distribution until 2018.
2) You said you received a 1099R for the distribution coded T, but the custodian would not issue a 2018 1099R until Jan, 2019. Are you sure the year on that first 1099R was 2018?
3) Then you convinced them to report the distribution for 2017, so they sent you a 2017 1099R, also coded T?
4) And in January 2019 they are going to issue a corrected 1099R cancelling out the 2018 1099 (if what you first received was actually a 2018 1099R)?
5) You are now deciding whether to amend your 2017 return or not to report the 2017 1099R on line 15a OR do nothing. I don't see a problem just waiting to see if the IRS send you an inquiry, but it is possible they will send you a tax bill thinking there might be earnings distributed. Of course, you could respond at that time with evidence that your mother first contributed before 2013 which means that the 5 year holding period was met.

Is that right?

User avatar
celia
Posts: 7709
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Received a 1099-R Form Late

Post by celia » Tue May 15, 2018 5:43 pm

kareysue wrote:
Tue May 15, 2018 4:35 pm
I apologize for using the incorrect terms. No contribution was done to the Inherited roth ira. Just that the distribution was done in 2018 but they marked it as 2017. So now they said they will correct it and put it back the way it was before. what they sent out was an error. One rep told me to send in a "removal of excess" form (https://www.tdameritrade.com/retail-en_ ... DA1401.pdf) The purpose of the form is to have the distribution done in 2017 to be reclassify as 2018. (It should have 2018 to begin with since the check date was Feb 2018)
I am totally confused now.

The form you referenced was for removing:
an ineligible, unwanted, accidental, or disallowed DEPOSIT from a Retirement or Coverdell account.
Did you deposit something into an IRA and now want to pull the contribution out?
Is the IRA the Inherited Roth IRA?

kareysue
Posts: 45
Joined: Fri Oct 10, 2008 10:07 pm

Re: Received a 1099-R Form Late

Post by kareysue » Tue May 15, 2018 6:02 pm

Alan S. wrote:
Tue May 15, 2018 5:16 pm

Sorry for all the confusion. I have double checked all the correct terminology to the best of my knowledge.

OK, is this correct?

1) You requested a distribution in 2017 (perhaps the inherited Roth RMD?), but the custodian did not make the distribution until 2018.
Yes I requested it be dated 2017 originally, but they refused because I pass the deadline for processing. Since this is a Inherited Roth IRA, there is no RMD and i just needed to empty it out by the fifth year after death.

2) You said you received a 1099R for the distribution coded T, but the custodian would not issue a 2018 1099R until Jan, 2019. Are you sure the year on that first 1099R was 2018?
I did not receive any 1099-R before May. Then in this month I received a 2017 1099R. The custodian asserted they will not issue any 1099-R until Jan 2019. I agreed to this before I finalize my tax return. If they left it at this none of this would be happening.

3) Then you convinced them to report the distribution for 2017, so they sent you a 2017 1099R, also coded T?
Originally, I wanted it to be 2017, but they refused so I said it was ok and to leave it as is. But a few days ago they sent me a late 1099-R with 2017 tax year. Remember I requested this back in Feb but they refused. Not sure why they changed their mind and decided to issue this late 1099-R in May 2018. (I believe there may be a lagged in communication somewhere or some QA team thought I wanted this)

4) And in January 2019 they are going to issue a corrected 1099R cancelling out the 2018 1099 (if what you first received was actually a 2018 1099R)?
They were not suppose to issue out any 1099-R for tax year 2017 and instead issue out only one 1099-R for the distribution taken early in 2018, which I should not get until 2019.

5) You are now deciding whether to amend your 2017 return or not to report the 2017 1099R on line 15a OR do nothing. I don't see a problem just waiting to see if the IRS send you an inquiry, but it is possible they will send you a tax bill thinking there might be earnings distributed. Of course, you could respond at that time with evidence that your mother first contributed before 2013 which means that the 5 year holding period was met.

I was going to get some beer and do nothing to my tax return since this cause no tax liability. But they call me and told me they made an error and would fix it so the distribution taken in early 2018 would generate a 1099-R with tax year 2018 rather than 2017. If they fix it that would be ideal since it would cancel out the 1099-R and put it at 0 and there would be no mismatch with the irs form. They need to void out the 1099-R form or correct it to $0 and modify the 2017 form 5498 so it would be the same amount as it was originally without the distribution taken out.

But these days these companies you can never trust so I just wanted to make sure once they resolve this issue they actually do it correctly, which brings me to this forum.

Lesson Learned: Don't wait till last minute to do anything. (My guess is that I was probably borderline to cut-off time then they refuse to give it to me, then someone who has too much time decided to double check and realize i was correct and decided to give in without realizing this was not what I wanted any longer)
Now you may be wondering why I waited last minute to do it. I was double checking everything I needed to do before the new years and I read some forum that roth ira has RMD. I did not read in detail that Inherited roth ira did not except for the 5 years after death rule. So I rush to do a distribution in case I get penalties. If I did my planning early in December rather than last minutes i think I can avoid this issue

Thanks all once again

Katietsu
Posts: 1381
Joined: Sun Sep 22, 2013 1:48 am

Re: Received a 1099-R Form Late

Post by Katietsu » Wed May 16, 2018 11:11 am

I read some forum that roth ira has RMD. I did not read in detail that Inherited roth ira did not except for the 5 years after death rule.
I want to make sure you understand your options. The inherited Roth IRA does have an RMD if you want to stretch out withdrawals as long as possible. In that case, you are to withdraw an RMD by December 31 of the year after the date of death and every year thereafter.

If you use the five years after death rule, then you must withdraw all the money from the Roth IRA within that time period.

kareysue
Posts: 45
Joined: Fri Oct 10, 2008 10:07 pm

Re: Received a 1099-R Form Late

Post by kareysue » Wed May 16, 2018 1:45 pm

Yes I know I want to do the 5 year rule where I withdraw everything by the end of the 5th year. I don't have to do annual rmd, I can do it all at the end of the 5th year after death

Post Reply