2020 1099-R error

[carl750]

A while back I took advantage of the COVID-19 law that allowed us to redeposit the 2020 RMD that I had already taken out. I did it via a phone call with one of their representatives that supposedly knew how to do it (money from another Vanguard account was the source of the money).

Now I just looked at my 1099-R and it list that amount as taxable.

What is going on?

[jebmke]

A while back I took advantage of the COVID-19 law that allowed us to redeposit the 2020 RMD that I had already taken out. I did it via a phone call with one of their representatives that supposedly knew how to do it (money from another Vanguard account was the source of the money).

Now I just looked at my 1099-R and it list that amount as taxable.

What is going on?

When you do your 2020 taxes, process it as a rollover. The gross amount will be reported but the taxable amount will be zero and you'll be all set.

[carl750]

Box 1 Gross and Box 2 Taxable are the same ........ that is why I said this has to be wrong

[Duckie]

Box 1 Gross and Box 2 Taxable are the same ........ that is why I said this has to be wrong

Is Box 2b (Taxable amount not determined) checked? It should be.

[LadyGeek]

todaysBob has a question which I've moved into a new thread. See: [1099-R shows my entire backdoor conversion taxable]

This thread is now in the Personal Finance (Not Investing) forum (tax question).

[carl750]

"Is Box 2b (Taxable amount not determined) checked? It should be." - it is, but I don't see how that erases the taxable amount that should have never been there according to the CARES (COVID) tax change.

[jebmke]

"Is Box 2b (Taxable amount not determined) checked? It should be." - it is, but I don't see how that erases the taxable amount that should have never been there according to the CARES (COVID) tax change.

The check box won't change the outcome. You have to process this as a rollover. Most tax software will provide guidance on how to do that. If you are preparing your tax return by hand with paper forms, I suggest looking at the General Instructions for Form 1040. That usually walks you through exactly what to put on the form.

[cas]

"Is Box 2b (Taxable amount not determined) checked? It should be." - it is, but I don't see how that erases the taxable amount that should have never been there according to the CARES (COVID) tax change.

The check box won't change the outcome. You have to process this as a rollover. Most tax software will provide guidance on how to do that. If you are preparing your tax return by hand with paper forms, I suggest looking at the General Instructions for Form 1040. That usually walks you through exactly what to put on the form.

Instructions for Form 1040 Lines 4a and 4b

IRA Distributions

[. . .]

Exception 1. Enter the total distribution on line 4a if you rolled over part or all of the distribution from one:

[. . .]

- IRA (other than a Roth IRA) to a qualified plan or another IRA (other than a Roth IRA).

Also enter "Rollover" next to line 4b. If the total distribution was rolled over, enter -0- on line 4b. If the total distribution wasn't rolled over, enter the part not rolled over on line 4b unless Exception 2 applies to the part not rolled over. Generally, a rollover must be made within 60 days after the day you received the distribution. For more details on rollovers, see Pub. 590-A and Pub. 590-B.

If you rolled over the distribution into a qualified plan or you made the rollover in 2021, include a statement explaining what you did.

The CARES act made an exception to the 60 day rule for 2020 (August, instead, IIRC) for RMDs rolled back from whence they came.

[carl750]

I finally received a reply from Vanguard, but I don't like. They said the amount has to be reported on the 1099-R and then subsequently I will get Form 5498 by May 31 ........... long after I have to file taxes. So what do I have to do, file and pay tax on money I don't really have since it was put back in the IRA and then file an amended return in the summer and hope the IRS will refund the tax? .... so when I really take out the money (and keep it) I don't pay taxes a 2nd time!

This is really ridiculous.

[livesoft]

This is not a big deal, so please relax. Follow the responses already given which means do not pay taxes on the money. You are all set.

[Kenkat]

No. All the 1099-R says is that there was a distribution. They don’t know what you did with the money, that’s up to you to decide. You also don’t have to “prove” that you rolled it over when you file you taxes. File your taxes according to what you did. If you rolled the money over, file that way. The 5498 is just the proof of the rollover if a question ever comes up, just like a receipt is proof of a deducted charitable contribution.

[carl750]

Thanks, I also printed the line 4 information that somebody provided the link to

[celia]

This is a taxpayer "error" (misunderstanding). The 1099-R is correct.

Just follow your tax software. After you report the distribution, it will ask what you did with it. Just enter that it was rolled over (NOT converted).

[Alan S.]

A while back I took advantage of the COVID-19 law that allowed us to redeposit the 2020 RMD that I had already taken out. I did it via a phone call with one of their representatives that supposedly knew how to do it (money from another Vanguard account was the source of the money).

Now I just looked at my 1099-R and it list that amount as taxable.

What is going on?

"Awhile back means prior to 8/31, correct?

I don't think you will have a problem, but note that Notice 2020-51 states that the rollover must be made to the "distributing IRA". You stated that the distribution was made from a different account.

D. Permitted repayments of RMDs previously distributed from an IRA. In the case of
an IRA owner or beneficiary who has already received a distribution of an amount that
would have been an RMD in 2020 but for section 2203 of the CARES Act or section 114
of the SECURE Act, the recipient may repay the distribution to the distributing IRA, even
if the repayment is made more than 60 days after the distribution, provided the
repayment is made no later than August 31, 2020. The repayment will be treated as a
rollover for purposes of § 408(d)(3) of the Code, but will not be treated as a rollover for
purposes of the one rollover per 12-month period limitation in § 408(d)(3)(B) and the
restriction on rollovers for nonspousal beneficiaries in § 408(d)(3)(C).

The one situation where this could be problematic is if the one rollover per 12 months limitation comes up. While rollbacks of these would be RMDs are not subject to that rule, if you do another such 60 day rollover in that 12 month period, VG might not realize that this particular rollover was exempt from the rule because they will see that the distribution was not returned to the same account. If possible, avoid doing another 60 day rollover of a distribution within 12 months of this particular distribution. Most of that 12 months might already have passed.

[aristotelian]

Try entering the 1099R in your software before crucifying Vanguard. There should be a way to report the CARES Act repayment. The distribution triggers the 1099R. When the distribution is made, Vanguard has no idea what you will do with the money. It is taxable, but when you roll it over the tax is zero.