Rollover vs Direct Transfer - How to fix a mistake

[OnlineAdventurer]

I recently moved a 403b from TIAA to a Rollover IRA at Fidelity. Today, I received a communication from Fidelity confirming the funds have been deposited, and that it was coded as a 'direct transfer'.

I’m now gathering that it should have been coded as a 'rollover' though instead of a direct transfer since the account type changed (from a 403b to a Rollover IRA.) My understanding is there’s a difference in the rollover vs transfer terms, and I assume it might be an important difference to the IRS. If that's the case, I'm unsure as to next steps given that the paperwork has been processed, codes have been entered, and a check deposited.

For the record, I believe I filled out the wrong paperwork, so I suspect I'm to blame.

I will be reaching out to Fidelity and TIAA to discuss, but I figured I would seek insight here first.

How does this get fixed or reported?

Thanks for your time.

[celia]

I don't see any errors here. All rollovers are transfers. But only some transfers are rollovers (transferring your RMD to Taxable is not a rollover).

Next January, you will get a Form 1099-R from TIAA that shows the money left your 403b with a code "7" (normal distribution). The following May, Fidelity will send you a Form 5498 that shows they received the money. Since the numbers match, the IRS will move on to the next tax return.

When you (or your tax preparer) does your taxes next year, after all the data from the 1099-R is entered, there will be interview question you need to answer. One of them will ask what you did with the money and you should answer that you rolled it all over to an IRA. Answer all the other questions and ask for help if you don't understand them. When you are done, you will move onto the next tax topic.

When you get done, if your return shows you paying any taxes on the rollover, return to this thread and let us know what happened. Most likely you didn't enter everything from the 1099-R or misunderstood an interview question.

Now, what was the problem, again?

[rkhusky]

The rollover should show up on 1040 line 5a, but not on 5b (taxable amount), with the word Rollover in the margin.

One year I forgot to include a rollover as above but never heard from the IRS, perhaps because it didn’t change my taxes.

[jebmke]

I don't see any errors here. All rollovers are transfers. But only some transfers are rollovers (transferring your RMD to Taxable is not a rollover).

Next January, you will get a Form 1099-R from TIAA that shows the money left your 403b with a code "7" (normal distribution). The following May, Fidelity will send you a Form 5498 that shows they received the money. Since the numbers match, the IRS will move on to the next tax return.

When you (or your tax preparer) does your taxes next year, after all the data from the 1099-R is entered, there will be interview question you need to answer. One of them will ask what you did with the money and you should answer that you rolled it all over to an IRA. Answer all the other questions and ask for help if you don't understand them. When you are done, you will move onto the next tax topic.

When you get done, if your return shows you paying any taxes on the rollover, return to this thread and let us know what happened. Most likely you didn't enter everything from the 1099-R or misunderstood an interview question.

Now, what was the problem, again?

Wouldn't the code in Box 7 be "G" for a direct rollover from a retirement plan to a Traditional IRA?

[Kendall]

This topic is now in the Personal Investments subforum.

[OnlineAdventurer]

I don't see any errors here. All rollovers are transfers. But only some transfers are rollovers (transferring your RMD to Taxable is not a rollover).

Next January, you will get a Form 1099-R from TIAA that shows the money left your 403b with a code "7" (normal distribution). The following May, Fidelity will send you a Form 5498 that shows they received the money. Since the numbers match, the IRS will move on to the next tax return.

When you (or your tax preparer) does your taxes next year, after all the data from the 1099-R is entered, there will be interview question you need to answer. One of them will ask what you did with the money and you should answer that you rolled it all over to an IRA. Answer all the other questions and ask for help if you don't understand them. When you are done, you will move onto the next tax topic.

When you get done, if your return shows you paying any taxes on the rollover, return to this thread and let us know what happened. Most likely you didn't enter everything from the 1099-R or misunderstood an interview question.

Now, what was the problem, again?

I greatly appreciate the thorough and reassuring response. I had been feeling like I’d done something wrong in the process and created a headache. The way you explained it all makes sense. I now know what to expect, and I’ll report back if I run into any issues.

Thank you!

[OnlineAdventurer]

The rollover should show up on 1040 line 5a, but not on 5b (taxable amount), with the word Rollover in the margin.

One year I forgot to include a rollover as above but never heard from the IRS, perhaps because it didn’t change my taxes.

Noted! Thank you for the helpful clarification.

[OnlineAdventurer]

I don't see any errors here. All rollovers are transfers. But only some transfers are rollovers (transferring your RMD to Taxable is not a rollover).

Next January, you will get a Form 1099-R from TIAA that shows the money left your 403b with a code "7" (normal distribution). The following May, Fidelity will send you a Form 5498 that shows they received the money. Since the numbers match, the IRS will move on to the next tax return.

When you (or your tax preparer) does your taxes next year, after all the data from the 1099-R is entered, there will be interview question you need to answer. One of them will ask what you did with the money and you should answer that you rolled it all over to an IRA. Answer all the other questions and ask for help if you don't understand them. When you are done, you will move onto the next tax topic.

When you get done, if your return shows you paying any taxes on the rollover, return to this thread and let us know what happened. Most likely you didn't enter everything from the 1099-R or misunderstood an interview question.

Now, what was the problem, again?

Wouldn't the code in Box 7 be "G" for a direct rollover from a retirement plan to a Traditional IRA?

A quick Google search leads me to believe that could be the correct code. I’ll be on the lookout. Thank you!

[jebmke]

I don't see any errors here. All rollovers are transfers. But only some transfers are rollovers (transferring your RMD to Taxable is not a rollover).

Next January, you will get a Form 1099-R from TIAA that shows the money left your 403b with a code "7" (normal distribution). The following May, Fidelity will send you a Form 5498 that shows they received the money. Since the numbers match, the IRS will move on to the next tax return.

When you (or your tax preparer) does your taxes next year, after all the data from the 1099-R is entered, there will be interview question you need to answer. One of them will ask what you did with the money and you should answer that you rolled it all over to an IRA. Answer all the other questions and ask for help if you don't understand them. When you are done, you will move onto the next tax topic.

When you get done, if your return shows you paying any taxes on the rollover, return to this thread and let us know what happened. Most likely you didn't enter everything from the 1099-R or misunderstood an interview question.

Now, what was the problem, again?

Wouldn't the code in Box 7 be "G" for a direct rollover from a retirement plan to a Traditional IRA?

A quick Google search leads me to believe that could be the correct code. I’ll be on the lookout. Thank you!

according to the IRS instructions to payers who complete 1099-Rs, that is the code they are supposed to use. Not all of them get it right though

[OnlineAdventurer]

I don't see any errors here. All rollovers are transfers. But only some transfers are rollovers (transferring your RMD to Taxable is not a rollover).

Next January, you will get a Form 1099-R from TIAA that shows the money left your 403b with a code "7" (normal distribution). The following May, Fidelity will send you a Form 5498 that shows they received the money. Since the numbers match, the IRS will move on to the next tax return.

When you (or your tax preparer) does your taxes next year, after all the data from the 1099-R is entered, there will be interview question you need to answer. One of them will ask what you did with the money and you should answer that you rolled it all over to an IRA. Answer all the other questions and ask for help if you don't understand them. When you are done, you will move onto the next tax topic.

When you get done, if your return shows you paying any taxes on the rollover, return to this thread and let us know what happened. Most likely you didn't enter everything from the 1099-R or misunderstood an interview question.

Now, what was the problem, again?

Wouldn't the code in Box 7 be "G" for a direct rollover from a retirement plan to a Traditional IRA?

A quick Google search leads me to believe that could be the correct code. I’ll be on the lookout. Thank you!

according to the IRS instructions to payers who complete 1099-Rs, that is the code they are supposed to use. Not all of them get it right though

In the hypothetical scenario that they don’t get it right though and an incorrect code is used, do you know if is TIAA responsible for correcting the form or is the essential part happening when I correctly fill out my tax forms?

[jebmke]

I don't see any errors here. All rollovers are transfers. But only some transfers are rollovers (transferring your RMD to Taxable is not a rollover).

Next January, you will get a Form 1099-R from TIAA that shows the money left your 403b with a code "7" (normal distribution). The following May, Fidelity will send you a Form 5498 that shows they received the money. Since the numbers match, the IRS will move on to the next tax return.

When you (or your tax preparer) does your taxes next year, after all the data from the 1099-R is entered, there will be interview question you need to answer. One of them will ask what you did with the money and you should answer that you rolled it all over to an IRA. Answer all the other questions and ask for help if you don't understand them. When you are done, you will move onto the next tax topic.

When you get done, if your return shows you paying any taxes on the rollover, return to this thread and let us know what happened. Most likely you didn't enter everything from the 1099-R or misunderstood an interview question.

Now, what was the problem, again?

Wouldn't the code in Box 7 be "G" for a direct rollover from a retirement plan to a Traditional IRA?

A quick Google search leads me to believe that could be the correct code. I’ll be on the lookout. Thank you!

according to the IRS instructions to payers who complete 1099-Rs, that is the code they are supposed to use. Not all of them get it right though

In the hypothetical scenario that they don’t get it right though and an incorrect code is used, do you know if is TIAA responsible for correcting the form or is the essential part happening when I correctly fill out my tax forms?

Typically, the taxpayer is asked to request that the payer (TIAA) issue a corrected 1099-R. Most will do this. The good news is that most of the large institutions know how to do this now, particularly for routine transfers like this. The chances they get it wrong are quite low in my opinion.

[vtMaps]

Wouldn't the code in Box 7 be "G" for a direct rollover from a retirement plan to a Traditional IRA?

It doesn't have to be from a retirement plan. I had a code "G" for a direct rollover from a traditional IRA to another traditional IRA. --vtMaps