CP2000 - rollover Vanguard IRA to TSP

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Topic Author
ishkadetto
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CP2000 - rollover Vanguard IRA to TSP

Post by ishkadetto »

I received a CP2000 two months ago saying I owed thousands in taxes due to "Retirement Income Taxable" from Vanguard. This was a direct rollover from Vanguard to my employer retirement plan (Thrift Savings Plan), so I shouldn't actually owe for this... right?? Well I replied immediately saying as much and have now received yet another notice - so my initial response doesn't seem to have been adequate. (I know they got my reply because there was another very minor issue on the initial CP2000 which I agreed with, amended my federal and state tax returns over it, they cashed the checks, and this new CP2000 reflects all that). Any ideas on a better way to convey that I do not owe taxes on a rollover since my first try failed?

First reply to IRS: "RE: Retirement income received from Vanguard Fiduciary Trust (Acct ######): I did a direct rollover of $XX,XXX from a Traditional IRA held with Vanguard into my employer-sponsored retirement plan (Federal TSP). The funds left the Vanguard IRA on 01/29/2016 and posted to the TSP on 02/15/2016. This rollover transaction is not taxable so no additional taxes should be owed." Short and sweet, so I thought. I sent along with this 1) the 1099-R I had received from Vanguard for that year (it shows the gross distribution amount and the distribution code G - meaning "direct rollover of a distribution to a qualified plan"), 2) the statement from Vanguard which showed "Dir rollover distribution" with the 01/29/2016 date, and 3) the "Confirmation Notice for Funds Transferred to TSP" which shows "Type of Funds Transferred: Traditional (Tax-Deferred)", the posting date 02/15/2016, and the amount which matches the amount of the gross distribution on the 1099-R. I highlighted the areas I thought applicable thinking they would be able to figure it out from there... but apparently I was wrong.

I did not receive any other tax forms like a 5498. I checked in Vanguard and there's definitely nothing else there but the 1099-R, and the TSP definitely has nothing other than that Confirmation Notice and the quarterly and annual statements that show the amount and clearly label it a "rollover".

Thank you for any assistance, this has really stumped me. Am I missing something? Was my first explanation that bad? Do I somehow actually owe taxes?

Edit: I double-checked my 2016 Form 1040, and I absolutely DID report on Line 15a the amount and Line 15b "rollover".

**UPDATE: Able to resolve the problem by calling the IRS, took about 50 minutes on hold then maybe 5 minutes total with the agent! I said I received the first CP2000, replied with some paperwork, and then received a second CP2000 with the Retirement Income Taxable still showing on there. Her immediate response was something like "yep, that shouldn't be on there", put me on hold, fixed it, then told me I would be getting another notice at some point showing I owed zero.
Last edited by ishkadetto on Mon Sep 17, 2018 5:16 pm, edited 2 times in total.
nolesrule
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by nolesrule »

Did you provide a copy of the TSP statement that included the funds deposit that matched the rollover amount?

I had a similar issue this year with a rollover from TIRA to 401k, and the 401k statement was the only thing I provided and they accepted that as enough evidence.
Topic Author
ishkadetto
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by ishkadetto »

nolesrule wrote: Sat Sep 15, 2018 10:21 am Did you provide a copy of the TSP statement that included the funds deposit that matched the rollover amount?

I had a similar issue this year with a rollover from TIRA to 401k, and the 401k statement was the only thing I provided and they accepted that as enough evidence.
I provided the TSP confirmation notice and also the quarterly TSP statement where everything matches the 1099-R amount.
MikeG62
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by MikeG62 »

ishkadetto wrote: Sat Sep 15, 2018 12:20 am
...Thank you for any assistance, this has really stumped me. Am I missing something? Was my first explanation that bad? Do I somehow actually owe taxes?
You may get a more well informed response if you can tell us exactly what they said in their response to you.

Also, there should be an option to call the person handling your audit and try and better understand what their issue is. It seems that 2016 was a big year for CP2000's. I don't know what is going on with that year or with the IRS.

I am dealing with them on an inquiry in 2016 as well. Answered their initial question and they responded 3 months later stating I could not do something else I did (not the subject of the original inquiry), which is clearly within the rules. I responded with a detailed response including a copy of the relevant IRS publication section. It feels like I am dealing with someone who has no clue about the tax rules.
Real Knowledge Comes Only From Experience
Topic Author
ishkadetto
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by ishkadetto »

Does anyone have an opinion or experience if calling the IRS is worth it or if I should just reply via mail with the same documentation again? Or with a better explanation of what happened than I originally gave? I'm afraid that if I call and spend hours on hold they will just tell me they can't do anything and to send the paperwork again and at the end of it I'll be in the same place. On the other hand, if they are able to help or to enter a note in their computer or even correct this immediately over the phone, I would be willing to try.
Topic Author
ishkadetto
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by ishkadetto »

MikeG62 wrote: Sat Sep 15, 2018 12:28 pm You may get a more well informed response if you can tell us exactly what they said in their response to you.
Their response was simply another CP2000, nearly exactly the same as the first except for the update/change on the unrelated minor interest income issue. No description written out or anything new otherwise.
Katietsu
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by Katietsu »

Yes, call the number on the CP2000 notice. That number will get you directly to someone who has the ability to look at and discuss the specifics of your case. Given the documentation that you already provided, it is quite possible that the whole thing could be cleared up while you are on the phone.
Alan S.
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by Alan S. »

There was another similar thread about this problem last week.

The 1040 Inst. clearly state that you should include an explanatory statement with your return when you roll over IRA money into a qualified plan. This is necessary because the IRS matching program for 1099R and 5498 forms will not work because a qualified plan (TSP) will NOT issue a 5498, so the IRS has nothing to match up to the 1099R, and the IRS may question the validity of the G coding. Did you provide the explanatory statement?

You also need to report the rollover on Form 1040 line 15a and 15b and show "rollover" next to 15b.
Topic Author
ishkadetto
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by ishkadetto »

Alan S. wrote: Sat Sep 15, 2018 2:16 pm The 1040 Inst. clearly state that you should include an explanatory statement with your return when you roll over IRA money into a qualified plan. This is necessary because the IRS matching program for 1099R and 5498 forms will not work because a qualified plan (TSP) will NOT issue a 5498, so the IRS has nothing to match up to the 1099R, and the IRS may question the validity of the G coding. Did you provide the explanatory statement?
I sent the statement: "RE: Retirement income received from Vanguard Fiduciary Trust (Acct ######): I did a direct rollover of $XX,XXX from a Traditional IRA held with Vanguard into my employer-sponsored retirement plan (Federal TSP). The funds left the Vanguard IRA on 01/29/2016 and posted to the TSP on 02/15/2016. This rollover transaction is not taxable so no additional taxes should be owed."

Is there a better way that this could have been worded? I thought 'direct rollover' and 'not taxable' would be effective, but apparently I was wrong :D Any suggestions are appreciated!
MikeG62
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by MikeG62 »

ishkadetto wrote: Sat Sep 15, 2018 2:26 pm
Alan S. wrote: Sat Sep 15, 2018 2:16 pm The 1040 Inst. clearly state that you should include an explanatory statement with your return when you roll over IRA money into a qualified plan. This is necessary because the IRS matching program for 1099R and 5498 forms will not work because a qualified plan (TSP) will NOT issue a 5498, so the IRS has nothing to match up to the 1099R, and the IRS may question the validity of the G coding. Did you provide the explanatory statement?
I sent the statement: "RE: Retirement income received from Vanguard Fiduciary Trust (Acct ######): I did a direct rollover of $XX,XXX from a Traditional IRA held with Vanguard into my employer-sponsored retirement plan (Federal TSP). The funds left the Vanguard IRA on 01/29/2016 and posted to the TSP on 02/15/2016. This rollover transaction is not taxable so no additional taxes should be owed."

Is there a better way that this could have been worded? I thought 'direct rollover' and 'not taxable' would be effective, but apparently I was wrong :D Any suggestions are appreciated!
I think what Alan S was saying is the words needed to be "included on the return you filed". However, if a CP2000 is computer generated I am not sure how those words come into play.

I think the detail provided in your response is good. I just think you are dealing with someone is not one of the sharpest crayons in the box over at the IRS. This is where I think a phone call directly to the number provided in their correspondence would go a long way to resolving this.
Real Knowledge Comes Only From Experience
folkher0
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by folkher0 »

ishkadetto wrote: Sat Sep 15, 2018 12:39 pm Does anyone have an opinion or experience if calling the IRS is worth it or if I should just reply via mail with the same documentation again? Or with a better explanation of what happened than I originally gave? I'm afraid that if I call and spend hours on hold they will just tell me they can't do anything and to send the paperwork again and at the end of it I'll be in the same place. On the other hand, if they are able to help or to enter a note in their computer or even correct this immediately over the phone, I would be willing to try.

Call them. It worked out well for me. I was shocked:

viewtopic.php?f=2&t=252197&p=4112498#p4112498
Topic Author
ishkadetto
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Re: CP2000 - rollover Vanguard IRA to TSP

Post by ishkadetto »

Katietsu wrote: Sat Sep 15, 2018 1:20 pm Yes, call the number on the CP2000 notice.
folkher0 wrote: Sat Sep 15, 2018 7:11 pm Call them. It worked out well for me.
MikeG62 wrote: Sat Sep 15, 2018 2:53 pm I think the detail provided in your response is good. I just think you are dealing with someone is not one of the sharpest crayons in the box over at the IRS. This is where I think a phone call directly to the number provided in their correspondence would go a long way to resolving this.
So glad I took the advice to go ahead and call, thank you! I called and was on hold for about 50 minutes, got a very polite and nice agent and the problem was resolved within 5 minutes. Easy peasy. After briefly stating myissue that the retirement rollover was still showing as taxable, she didn't even pause for a second before basically saying "yep, that shouldn't be on there", put me on hold, fixed it, and let me know I would be getting another notice in he mail showing I owe zero. Woohoo!
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