Roth 60 day loan and tax paperwork

[MrJones]

[Topic is now in Personal Finance (Not Investing) - mod mkc]

If I take a 60 day loan* from a Roth account in Dec 2023 and pay it back in Jan 2024, would this cause tax paperwork headache? Is there a reason to keep the 60 days within a calendar year?

*It's technically not a loan, but used as such, as an indirect rollover enables one to sit on the money for upto 60 days before rolling it over.

[zero_coupon]

Is there a reason to keep the 60 days within a calendar year?

celia seems to think so:

It will ... be cleaner if the withdrawal and contribution are done in the same calendar year.

You may find useful info about indirect rollovers in the following thread: viewtopic.php?t=381130

[celia]

My preference for doing both transactions in the same year is only because the corresponding tax forms (1099-R and Form 5498) will be generated for the same year (instead of for different years).

Form 5498 also doesn't arrive until May in the year after the year for which the contribution was made. Since contributions can be made until April 15 after the year for which the contribution is meant, the 5498 can't be mailed earlier than that.

(Luckily it only needs to be filed away, not entered on a tax return.)

[toddthebod]

It doesn't matter if you cross the calendar year. You enter the distribution on line 4a, 0 on 4b, and you write "rollover."

[MrJones]

Celia, good to know on how the forms work for this, thank you!

It doesn't matter if you cross the calendar year. You enter the distribution on line 4a, 0 on 4b, and you write "rollover."

Perfect, this helps, thanks much!

[Asyouwish]

It will help to keep a copy now of the account statements showing the withdrawal date and the Re deposit date in case you get a CP2000 document matching notice. The 1099-R will be dated 2023 and the 5498 will be 2024. This may flag your return for a document mismatch. It’s a simple step to respond by showing the 60 day time frame was met with the account statements. This CP2000 may not show up until very late 2024 or even in calendar year 2025. If you have these documents with your 2023 return at home, it’s easier than trying to backtrack and get statements that are 12-18 months old.

[newacct]

From the 1040 instructions for 2022, for line 4a and 4b, Exception 1:

If you rolled over the distribution into a qualified plan or you made the rollover in 2023, include a statement explaining what you did.

Here 2023 is the next year from the year of the instructions. So you should attach a statement if you cross years.

[MrJones]

It will help to keep a copy now of the account statements showing the withdrawal date and the Re deposit date in case you get a CP2000 document matching notice. The 1099-R will be dated 2023 and the 5498 will be 2024. This may flag your return for a document mismatch. It’s a simple step to respond by showing the 60 day time frame was met with the account statements. This CP2000 may not show up until very late 2024 or even in calendar year 2025. If you have these documents with your 2023 return at home, it’s easier than trying to backtrack and get statements that are 12-18 months old.

Very good point. I tend to save all documents anyway, but will ensure I file these relevant ones.