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Retirement - What the
1099-R Means To You
Preface ~ Client Letter - What this idea is about
Dear
Client:
Topic - A detailed explanation of how the 1099-R is filled out by the
payer of the retirement income
To learn how to use the numbers from the 1099-R
Who This Applies to: Retired IndividualsWhen to Perform:
When you receive a 1099-RSpecial Circumstances: Warnings & Special Circumstances
Why This Is Important: Informs you what each of the amounts represents
What You Will Need - the 1099-R, your statements from the payer your received during the year and your bank statements to double check the amounts if needed. If you rolled-over any of the amounts you are also advised to look at eh receiving account to double check its amount.
Learning Objectives (What You Asked) ~ Your Questions: The following questions will be answered
This Topic OBJECTIVE is or What it Does
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Summary
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Related Information
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A few closely related topics & pages From Bob Parrish CPA PC (left-click this to expand it):
Plain English Explanation
Object Restated
Why or How It Works
Alternatives
Cost V. Benefit
Other
Reserved
Your Answers
This Topic OBJECTIVE is: What it does Explanation of this topic and how it may affect you (for how it may affect you also refer to : Financial Accounting: Bookkeeping & Financials ~ Compliance - What is required for protection, defense, etc. ~ Alerts & Dangers)
Start of Plain English Section
Why or How it works - Both Sides of the Equation and Examples:
What it does: The 1099-R shows amounts paid to you. These forms are sent electronically directly to the IRS computers which will match the records from the payer to your personal tax return.
What's New for 2000?
New products. To help make it easier for you to get only the information you need to complete the Forms 1099, 1098, 5498, and W-2G you file, we are now providing general and specific form instructions as separate products. The new products you should use for 2000 are the General Instructions for Forms 1099, 1098, 5498, and W-2G, which contains general information concerning Forms 1099-R and 5498 and other forms in the 1099 series, and the separate specific instructions for each information return you file. If you prefer to have all the specific and general instructions in one booklet, the 2000 Instructions for Forms 1099, 1098, 5498, and W-2G is also available.
5-year tax option repealed. For tax years after 1999, recent legislation repealed the 5-year tax option for lump-sum distributions. Therefore, 5-or was deleted from Code A under Box 7 of Form 1099-R. The 10-year tax option is still available for participants (or beneficiaries of participants) born before 1936.
Levies not subject to section 72(t). Recent legislation excludes a distribution from a qualified plan due to an IRS levy under section 6331 from the early distribution penalty under section 72(t). Therefore, use Code 2, if appropriate, in box 7 on Form 1099-R for such a distribution.
IRA recharacterizations and Roth reconversions alternative reporting methods extended. For 2000, you may continue to report IRA recharacterizations and Roth reconversions with the same trustee on Forms 1099-R and 5498 using a reasonable alternative method. Announcement 99-5, 1999-3 I.R.B. 16, is extended. See Announcement 99-106, 1999-45 I.R.B. 561, dated November 8, 1999. Also see the TIP on page R-3.
Specific Instructions for Form 1099-R
File Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for each person to whom you have made a designated distribution of $10 or more from profit-sharing or retirement plans, any IRAs, annuities, pensions, insurance contracts, survivor income benefit plans, permanent and total disability payments under life insurance contracts, charitable gift annuities, etc.Also report on Form 1099-R death benefit payments made by employers that are not made as part of a pension, profit-sharing, or retirement plan. (See the instructions for box 1 on page R-5.)
Reportable disability payments made from a retirement plan must be reported on Form 1099-R.
Generally, do not report payments subject to withholding of social security and Medicare taxes on this form. Report such payments on Form W-2, Wage and Tax Statement.
Do not report amounts totally exempt from tax, such as workers' compensation and Department of Veterans Affairs (VA) payments. However, if part of the distribution is taxable and part is nontaxable, file a Form 1099-R reporting the entire distribution.
Military retirement pay. Report payments to military retirees on Form 1099-R. Report military retirement pay awarded as a property settlement to a former spouse on Form 1099-R under the name and taxpayer identification number of the recipient, not those of the military retiree.
Also report payments of survivor benefit annuities on Form 1099-R.
Nonqualified plans. Report any reportable distributions from commercial annuities on Form 1099-R. Report distributions to plan participants from nonqualified deferred compensation plans, including section 457 plans, on Form W-2, not on Form 1099-R. However, report distributions to beneficiaries of deceased employees on Form 1099-R. Report distributions to beneficiaries in boxes 1 and 2a and use Code 4 in box 7.
Charitable gift annuities. If cash or capital gain property is donated in exchange for a charitable gift annuity, report distributions from the annuity on Form 1099-R. Report in box 1 the total amount distributed during the year. Report in box 2a the taxable amount. If any amount is taxable as a capital gain, report it in box 3. Please advise the annuity recipient of any amount in box 3 subject to the 28% rate gain, such as for collectibles, and any unrecaptured section 1250 gain. Report in box 5 any nontaxable amount. Enter Code F in box 7. See Regulations section 1.1011-2(c), Example 8.
Life insurance, annuity, and endowment contracts. Report on Form 1099-R payments of matured or redeemed annuity, endowment, and life insurance contracts. However, you need not file Form 1099-R to report the surrender of a life insurance contract if it is reasonable to believe that none of the payment is includible in the income of the recipient. If you are reporting the surrender of a life insurance contract on Form 1099-R, enter Code 7 in box 7.
Also report premiums paid by a trustee or custodian for current life or other insurance protection (PS 58 costs). PS 58 costs are not subject to the 10% early distribution tax under section 72(t). Enter Code 9 in box 7.
Also see the Instructions for Form 1099-LTC for information on reporting accelerated death benefits.
Section 1035 exchange. A tax-free section 1035 exchange is the exchange of (1) a life insurance contract for another life insurance, endowment, or annuity contract, (2) an endowment contract for an annuity contract or for another endowment contract that provides for regular payments to begin no later than they would have begun under the old contract, and (3) an annuity contract for another annuity contract. However, the distribution of other property or the cancellation of a contract loan at the time of the exchange may be taxable and reportable on a separate Form 1099-R.
These exchanges of contracts are generally reportable on Form 1099-R. However, if (1) the exchange occurs within the same company, (2) the exchange is solely a contract for contract exchange, as defined above, that does not result in a designated distribution, and (3) the company maintains adequate records of the policyholder's basis in the contracts, reporting on Form 1099-R is not required. For example, a life insurance contract issued by Company X received in exchange solely for another life insurance contract previously issued by Company X does not have to be reported on Form 1099-R as long as the company maintains the required records. (See Rev. Proc. 92-26, 1992-1 C.B. 744.)
For those section 1035 exchanges that are reportable on Form 1099-R, enter the total value of the contract in box 1, 0 (zero) in box 2a, the total premiums paid in box 5, and Code 6 in box 7.
IRA distributions. Distributions from any individual retirement arrangement (IRA), except a Roth IRA or education IRA (Ed IRA), must be reported in boxes 1 and 2a regardless of the amount. You may mark the Taxable amount not determined box in box 2b. But see the instructions for box 2a on page R-5 for how to report the withdrawal of IRA contributions under section 408(d)(4). Also see Transfers on page R-3 for information on trustee-to-trustee transfers, including recharacterizations. The direct rollover provisions (see page R-2) do not apply to distributions from any IRA.
An IRA includes all investments under one IRA plan or account. File only one Form 1099-R for distributions from all investments under one plan that are paid in one year to one recipient, unless you must enter different codes in box 7. You do not have to file a separate Form 1099-R for each distribution under the plan.
Roth and Ed IRAs. For distributions from a Roth IRA or an Ed IRA, report the gross distribution in box 1 but generally leave box 2a blank. Mark the Taxable amount not determined box in box 2b. Enter Code J or M as appropriate in box 7. You may also enter Code 1, 2, 3, 4, 5, 8, or P with Code J and 3, 4, 8, or P with Code M. It is not necessary to mark the IRA/SEP/SIMPLE checkbox. For the withdrawal of excess contributions, see Box 2a on page R-5.
Roth conversions. You must report an IRA that is converted or reconverted this year to a Roth IRA in boxes 1 and 2a, even if the conversion is a trustee-to-trustee transfer or is with the same trustee. Enter Code 2 or 7 in box 7 as appropriate.
Even though 1998 conversions are taxable over 4 years (unless the participant elects otherwise), you only had to report the full amount converted on the 1998 Form 1099-R. You do not have to issue Form 1099-R for any future year to report the 1998 conversion.
Conduit IRAs. If you know the distribution is from a conduit IRA, follow these rules. If a distribution from a conduit IRA is paid to the participant, report the full amount in boxes 1 and 2a, and use Code 1 or 7 in box 7 depending on the participant's age. If a distribution from a conduit IRA is paid to the trustee of or is transferred to an employer plan, report the distribution in box 1, 0 (zero) in box 2a, and use Code H in box 7.
IRA revocation. If a traditional IRA is revoked during its first 7 days (under Regulations section 1.408-6(d)(4)(ii)), the distribution from the IRA must be reported. In addition, Form 5498, IRA Contribution Information, must be filed to report any regular or rollover contribution to the IRA that is revoked.
If a regular contribution is made to a traditional IRA that later is revoked, and distribution is made to the taxpayer, enter the gross distribution in box 1 of Form 1099-R. If no earnings are distributed, enter 0 (zero) in box 2a and Code 8 in box 7. If earnings are distributed, enter the amount of earnings in box 2a. Such earnings could be subject to the early distribution tax under section 72(t). If they are subject to that tax, enter Code 1 in box 7; if the earnings are not subject to that tax, enter Code 8.
If you know that the taxpayer deducted the contribution, report the total amount distributed in box 2a and use the appropriate code in box 7.
If a rollover contribution is made to an IRA that later is revoked, and distribution is made to the taxpayer, enter in boxes 1 and 2a of Form 1099-R the gross distribution and the appropriate code in box 7. Follow this same procedure for a transfer from one IRA to another IRA that later is revoked. The distribution could be subject to the early distribution tax under section 72(t).
If an employer SEP (simplified employee pension) or SIMPLE (savings incentive match plan for employees) contribution is made and the SEP or SIMPLE is revoked by the employee, report the distribution as fully taxable.
For more information, see Rev. Proc. 91-70, 1991-2 C.B. 899.
DECs. If you are reporting a total distribution from a plan that includes a distribution of deductible voluntary employee contributions (DECs), file two Forms 1099-R - one to report the distribution of DECs, the other to report the distribution from the other part of the plan. Report the distribution of DECs in boxes 1 and 2a on the separate Form 1099-R. However, for the direct rollover (explained below) of funds that include DECs, file only one Form 1099-R to report the direct rollover of the entire amount.
Direct rollovers. You must report a direct rollover of an eligible rollover distribution. A direct rollover is the direct payment of the distribution from a qualified plan or tax-sheltered annuity to a traditional IRA or other eligible retirement plan. A direct rollover may be made for the employee, for the employee's surviving spouse, or for the spouse or former spouse who is an alternate payee under a qualified domestic relations order (QDRO). However, a direct rollover for a surviving spouse may be made only to a traditional IRA.
An eligible rollover distribution is the taxable part of any distribution of the balance to the credit of the employee (including net unrealized appreciation) from a qualified plan (or tax-sheltered annuity but not from an IRA) except:
- One of a series of substantially equal periodic payments made
(at least annually) for:
- The life of the employee (or the joint lives of the employee and the employee's designated beneficiary);
- The life expectancy of the employee (or the joint life and last survivor expectancy of the employee and the employee's designated beneficiary); or
- A specified period of 10 years or more.
- A required minimum distribution (under section 401(a)(9)). A plan administrator is permitted to assume there is no designated beneficiary for purposes of determining the minimum distribution.
- Nontaxable amounts, including a return of the employee's investment in the contract (after-tax contributions).
- Elective deferrals (under section 402(g)(3)) and earnings returned because of the section 415 limits.
- Corrective distributions of excess deferrals (under section 402(g)) and earnings.
- Corrective distributions of excess contributions under a qualified cash or deferred arrangement (under section 401(k)) and excess aggregate contributions (under section 401(m)) and earnings.
- Loans treated as deemed distributions (under section 72(p)). (But plan loan offset amounts can be eligible rollover distributions. See Regulations section 1.402(c)-2, Q/A-9.)
- Section 404(k) dividends.
- PS 58 costs.
- Distributions to a payee other than the employee, the employee's surviving spouse, or a spouse or former spouse who is an alternate payee under a QDRO.
- Hardship distributions described in section 401(k)(2)(B)(i)(IV). See Notice 99-5, 1999-3 I.R.B. 10.
Amounts paid under an annuity contract purchased for and distributed to a participant under a qualified plan can qualify as eligible rollover distributions. (See Regulations section 1.402(c)-2, Q/A-10.)
Any part of an eligible rollover distribution that is not a direct rollover is subject to 20% income tax withholding. See Box 4 on page R-6.
Reporting a direct rollover. Report a direct rollover in box 1 and 0 (zero) in box 2a. You do not have to report capital gain in box 3 or net unrealized appreciation in box 6. Enter the applicable Code G or H in box 7. Prepare the form using the name and social security number of the person for whose benefit the funds were rolled over (generally the participant), not those of the trustee of the IRA or other plan to which the funds were rolled.
If you receive a direct rollover to an IRA, you must prepare Form 5498. If you receive a direct rollover to a qualified plan or tax-sheltered annuity, no report is required.
If part of the distribution is a direct rollover and part is distributed to the recipient, prepare two Forms 1099-R.
For more information on eligible rollover distributions, including substantially equal periodic payments, required minimum distributions, and plan loan offset amounts, see Regulations sections 1.402(c)-2 and 1.403(b)-2.
Explanation to recipients before eligible rollover distributions (section 402(f) notice). For qualified plans, no more than 90 days and no fewer than 30 days before making an eligible rollover distribution (or before the annuity starting date), the plan administrator must provide a written explanation to each recipient (section 402(f) notice). However, if the recipient who has received the section 402(f) notice affirmatively elects a distribution, you will not fail to satisfy the timing requirements merely because you make the distribution fewer than 30 days after you provided the notice as long as you meet the requirements of Regulations section 1.402(f)-1, Q/A-2. You may provide the 402(f) notice more than 90 days before a distribution if you also provide a summary of the notice during the 90-day/30-day period before the distribution.
The notice must explain the rollover rules, the special tax treatment for lump-sum distributions, the direct rollover option (and any default procedures), and the mandatory 20% withholding rules. The notice and summary are permitted either on a written paper document or through an electronic medium reasonably accessible to the recipient; see the regulations under section 402(f).
For periodic payments that are eligible rollover distributions, you must provide the notice before the first payment and at least once a year as long as the payments continue. Notice 92-48, 1992-2 C.B. 377, contains a model notice the plan administrator can use to satisfy the notice requirement. For tax-sheltered annuities, the payer must provide an explanation of the direct rollover option within the time period described above or some other reasonable period of time.
Transfers. Generally, do not report transfers between trustees or issuers (unless they are direct rollovers from qualified plans) that involve no payment or distribution of funds to the participant including a trustee-to-trustee transfer from one IRA to another (unless they are recharacterized IRA contributions or Roth conversions) or from one tax-sheltered (section 403(b)) arrangement to another.
IRA recharacterizations. You must report each recharacterization of an IRA contribution. If a participant makes a contribution to an IRA (first IRA) for a year, the participant may choose to recharacterize the contribution by transferring, in a trustee-to-trustee transfer, any part of the contribution (plus earnings) to another IRA (second IRA). The contribution is treated as made to the second IRA (recharacterization). A recharacterization may be made with the same trustee or with another trustee. The trustee of the first IRA must report the recharacterization as a distribution on Form 1099-R (and the contribution to the first IRA and its character on Form 5498).
Enter the fair market value (FMV) of the amount recharacterized in box 1, 0 (zero) in box 2a, and Code R in box 7. It is not necessary to mark the IRA/SEP/SIMPLE checkbox. For more information, see Notice 98-49, 1998-2 C.B. 365.
Roth conversions. A Roth conversion is not considered a trustee-to-trustee transfer. You must report a Roth conversion or reconversion as a distribution. Therefore, for an IRA that is converted to a Roth IRA, even with the same trustee, you must report the amount converted in boxes 1 and 2a. Use Code 2 or 7 in box 7 as appropriate.
For IRA recharacterizations and Roth reconversions in 2000 with the same trustee, you may report the results of the recharacterizations and reconversions on Forms 1099-R and 5498 using a reasonable alternative method. However, if you use an alternative method to report, in addition to Forms 1099-R and 5498, you must provide instructions to the IRA owner, in conjunction with account statements or other information, about how to use the information shown on the forms to properly report the recharacterizations and reconversions on Form 1040. The instructions must include how to use the information to properly complete Form 8606, Nondeductible IRAs, and Form 5329, Additional Taxes Attributable to IRAs, Other Qualified Retirement Plans, Annuities, Modified Endowment Contracts, and MSAs. If trustees use different employer identification numbers to file Forms 1099-R and 5498, they are not the same trustee. See Announcement 99-5, 1999-3 I.R.B. 16, for more information.
SIMPLE IRAs. Do not report a trustee-to-trustee transfer from one SIMPLE to another SIMPLE. However, you must report as a taxable distribution in boxes 1 and 2a, a trustee-to-trustee transfer from a SIMPLE IRA to an IRA that is not a SIMPLE IRA during the 2-year period beginning on the day contributions are first deposited in the individual's SIMPLE by the employer. Use Code S in box 7 if appropriate.
Section 1035 exchange. You may have to report exchanges of insurance contracts, including an exchange under section 1035, under which any designated distribution may be made. For a section 1035 exchange that is in part taxable, file a separate Form 1099-R to report the taxable amount. See Section 1035 exchange on page R-1.
Transfer of IRA to spouse. If you transfer an interest in an IRA from one spouse to another spouse under a divorce or separation instrument, the transfer is tax free. Do not report such a transfer on Form 1099-R.
Corrective distributions. You must report on Form 1099-R corrective distributions of excess deferrals, excess contributions and excess aggregate contributions under section 401(a) plans, section 401(k) cash or deferred arrangements, section 403(a) annuity plans, section 403(b) salary reduction agreements, and salary reduction simplified employee pensions (SARSEPs under section 408(k)(6)). Corrective distributions of an excess plus earnings are reportable on Form 1099-R for the year of the distribution regardless of when the distribution is taxable to the participant. Enter Code 8, P, or in some cases, D in box 7 to designate the distribution and the year it is taxable.
If the excess and the earnings are taxable in two different years, you must issue two Forms 1099-R to designate the year each is taxable.
You must advise the plan participant at the time of the distribution of the year or years in which the distribution is taxable and that it may be necessary to file an amended return for a prior tax year.
For more information about reporting corrective distributions, see below; Codes 8, P, and D on page R-8; Notice 89-32, 1989-1 C.B. 671; Notice 88-33, 1988-1 C.B. 513; Notice 87-77, 1987-2 C.B. 385; Rev. Proc. 91-44, 1991-2 C.B. 733 (SARSEPs); and the regulations under sections 401(k) and 401(m).
Excess deferrals. Excess deferrals under section 402(g) can occur in 401(k) plans, 403(b) plans, or SARSEPs. If distributed by April 15 of the year following the year of deferral, the excess is taxable to the participant in the year of deferral, but the earnings are taxable in the year distributed. Except for a SARSEP, if the distribution occurs after April 15, the excess is taxable in the year of deferral and the year distributed. The earnings are taxable in the year distributed. For a SARSEP, excess deferrals not withdrawn by April 15 are considered regular IRA contributions subject to the IRA contribution limits. Corrective distributions of excess deferrals are not subject to Federal income tax withholding or social security and Medicare taxes. For losses on excess deferrals, see Losses on page R-4.
Excess contributions. Excess contributions can
occur in a 401(k) plan or a SARSEP. For a 401(k) plan, if the
withdrawal of the excess plus earnings occurs within 2½ months
after the close of the plan year, the excess and earnings are
taxable to the participant in the year deferred. But if the
corrective distribution is made after the 2 Excess contributions distributed within the 2½-month period are not
subject to Federal income tax withholding or social security and
Medicare taxes. But amounts distributed from a 401(k) plan after the
2½-month period are subject to Federal income tax withholding under
section 3405.
Excess aggregate contributions. Excess
aggregate contributions under section 401(m) can occur in 401(a),
401(k), 403(a), and 403(b) plans. A corrective distribution of
excess aggregate contributions plus earnings within 2½ months after
the close of the plan year is taxable to the participant in the year
the contributions were made. A corrective distribution made after
the 2½-month period is taxable in the year distributed. Report the
gross distribution in box 1 of Form 1099-R. In box 2a, enter the
excess and earnings distributed less any after-tax contributions. If
the total excess contributions and excess aggregate contributions
distributed are less than $100 (excluding earnings), the
distribution is taxable in the year of distribution.
A distribution made within 2½ months after the close of the plan
year is not subject to Federal income tax withholding or
social security and Medicare taxes. But amounts distributed after 2½
months are subject to Federal income tax withholding under section
3405.
Losses. If a corrective
distribution of an excess deferral is made in a year after the year
of deferral and a net loss has been allocated to the excess
deferral, report the corrective distribution amount in boxes 1 and
2a of Form 1099-R for the year of the distribution with the
appropriate distribution code in box 7. However, taxpayers must
include the total amount of the excess deferral (unadjusted for
loss) in income in the year of deferral, and they may report a loss
on the tax return for the year the corrective distribution is made.
Therefore, if there are no employer securities distributed, show the
actual cash and/or fair market value (FMV) of property distributed
in boxes 1 and 2a, and make no entry in box 5. If only employer
securities are distributed, show the FMV of the securities in boxes
1 and 2a and make no entry in box 5 or 6. If both employer
securities and other property are distributed, show the actual cash
and/or FMV of the property distributed in box 1, the gross less any
net unrealized appreciation (NUA) on employer securities in box 2a,
no entry in box 5, and any NUA in box 6.
Excess annual additions under section 415.
You must report on Form 1099-R distributions made under Regulations
section 1.415-6(b)(6)(iv) of elective deferrals or a return of
employee contributions (and gains attributable to such employee
contributions) to reduce excess annual additions arising from the
allocation of forfeitures, a reasonable error in estimating a
participant's compensation, or a reasonable error in determining the
amount of elective deferrals that may be made for an individual
under the limits of section 415.
Such distributions are not eligible rollover distributions
although they are subject to income tax withholding under section
3405. They are not subject to social security, Medicare, or Federal
Unemployment Tax Act (FUTA) taxes. In addition, such distributions
are not subject to the early distribution tax under section 72(t).
You may report the distribution of elective deferrals and
employee contributions (and gains attributable to such elective
deferrals and employee contributions) on the same Form 1099-R.
However, if you made other distributions during the year, report
them on a separate Form 1099-R. Because the distribution of elective
deferrals is fully taxable (no part of the distribution is a return
of the investment in the contract), report the total amount of the
distribution in boxes 1 and 2a. Leave box 5 blank, and enter Code E
in box 7. For a return of employee contributions plus gains, enter
the gross distribution in box 1, the gains attributable to the
employee contributions being returned in box 2a, and the employee
contributions being returned in box 5. Enter Code E in box 7.
For more information, see Rev. Proc. 92-93, 1992-2 C.B. 505.
Failing the ADP or ACP test after a total distribution.
If you make a total distribution in 2000 and file a Form 1099-R with
the IRS and then discover in 2001 that the plan failed either
the section 401(k)(3) ADP (actual deferral percentage) test for 2000
and you compute excess contributions or the section 401(m)(2)
ACP (actual contribution percentage) test and you compute excess
aggregate contributions, you must recharacterize part of the total
distribution as excess contributions or excess aggregate
contributions. First, file a CORRECTED Form 1099-R for 2000 for the
correct amount of the total distribution (not including the amount
recharacterized as excess contributions or excess aggregate
contributions). Second, file a NEW Form 1099-R for 2000 for the
excess contributions or excess aggregate contributions and allocable
earnings.
To avoid a late filing penalty if the new Form 1099-R is filed
after the due date, enter in the bottom margin of Form 1096,
Annual Summary and Transmittal of U.S. Information Returns, the
words Filed To Correct Excess Contributions.
You must also issue copies of the Forms 1099-R to the plan
participant with an explanation of why these new forms are being
issued.
Loans treated as distributions. The
following rules are based on Proposed Regulations section 1.72(p)-1
published in the Federal Register on December 21, 1995, and January
2, 1998. You may rely on those regulations until further guidance is
issued. Also see section 72(p) and 72(e)(4)(A).
A loan from a qualified plan under sections 401 and 403(a) and
(b), and a plan maintained by the United States, a state or
political subdivision, or any of its subsidiary agencies made to a
participant or beneficiary is not treated as a distribution
from the plan if the loan satisfies the following requirements:
Certain exceptions, grace periods, and suspension of the
repayment schedule may apply.
The loan agreement must specify the amount of the loan, the term
of the loan, and the repayment schedule. The agreement may include
more than one document.
If a loan fails to satisfy 1, 2, or 3 above,
the balance of the loan is a deemed distribution. The distribution
may occur at the time the loan is made or later if the loan is not
repaid in accordance with the repayment schedule.
If a loan fails to satisfy 4 above at the time the loan is
made, the amount that exceeds the amount permitted to be loaned is a
deemed distribution.
If a loan is treated as a deemed distribution, it is reportable
on Form 1099-R using the normal taxation rules of section 72,
including tax basis rules. The distribution also may be subject to
the 10% penalty for early distributions under section 72(t). It is
not eligible to be rolled over to an eligible retirement plan nor is
it eligible for the 10-year tax option. On Form 1099-R, complete the
appropriate boxes, including boxes 1 and 2a, and enter Code L in box
7. You also may enter another applicable code, such as Code 1 or 2,
in box 7.
Interest that accrues after the deemed distribution of a loan is
not an additional loan, and, therefore is not reportable on Form
1099-R.
If a participant's accrued benefit is reduced (offset) to repay a
loan, the amount of the account balance that is offset against the
loan is an actual distribution. Report it as you would any other
actual distribution. Do not enter Code L in box 7.
Loans that are treated as deemed distributions or that are actual
distributions are subject to Federal income tax withholding. If a
distribution occurs after the loan is made, you must withhold only
if you distributed cash or property (other than employer securities)
at the time of the deemed or actual distribution.
Subsequent distributions. If a
participant makes any cash repayments on a loan that was
reported on Form 1099-R as a deemed distribution, the repayments
increase the participant's tax basis in the plan as if the
repayments were after-tax contributions. However, such repayments
are not treated as after-tax contributions for purposes of section
401(m) or 415(c)(2)(B).
For a deemed distribution that was reported on Form 1099-R but
was not repaid, the deemed distribution does not
increase the participant's basis.
Box 1
Enter the total amount of the distribution before income
tax or other deductions were withheld. Include direct rollovers,
premiums paid by a trustee or custodian for current life or other
insurance protection (PS 58 costs), and the gross amount of any IRA
distribution, including a recharacterization and a Roth conversion.
However, in the case of a distribution by a trust representing CDs
redeemed early, report the net amount distributed. Also, see Box
6 on page R-7.
Include in this box the value of U.S. Savings Bonds distributed
from a plan. Enter the appropriate taxable amount in box 2a. Please
furnish a statement to the plan participant showing the value of
each bond at the time of distribution. This will provide him or her
with the information necessary to figure the interest income on each
bond when it is redeemed.
In addition to reporting death benefit payments made from a plan,
report here any death benefit payments made by employers that
are not made as part of a pension, profit-sharing, or retirement
plan. Also enter this amount in box 2a. Enter Code 4 in box 7. For
example, the board of directors of XYZ Corporation votes to pay the
widow of one of its employees a lump sum death benefit.
Report this amount in boxes 1 and 2a, and show Code 4 in box 7.
Do not report accelerated death benefits on Form 1099-R.
Report them on Form 1099-LTC, Long-Term Care and Accelerated
Death Benefits.
For a section 1035 exchange, see Section 1035 exchange on
page R-1.
Employer securities and other property.
If you distribute employer securities or other property, include in
box 1 the FMV of the securities or other property on the date of
distribution. If there is a loss, see Losses on page R-6.
If you are distributing worthless property only, you are not
required to file Form 1099-R. However, you may file and enter 0
(zero) in boxes 1 and 2a and any after-tax employee contributions in
box 5.
Box 2a
Generally, you must enter the taxable amount in box 2a. However,
if you are unable to reasonably obtain the data needed to compute
the taxable amount, leave this box blank. Do not include
excludable or tax-deferred amounts reportable in boxes 5, 6, and 8.
For a direct rollover from a qualified plan or tax-sheltered
annuity, for a distribution from a conduit IRA that is payable to
the trustee of or is transferred to an employer plan, for an IRA
recharacterization, or for a nontaxable section 1035 exchange of
life insurance, annuity, or endowment contracts, enter 0 (zero) in
box 2a.
PS 58 costs and DECs. Include PS 58
costs that were reported in box 1. However, do not report PS 58
costs and a distribution on the same Form 1099-R. Use a separate
Form 1099-R for each. Enter Code 9 in box 7 for PS 58 costs. See
Regulations section 1.72-16(b) and Rev. Ruls. 55-747, 1955-2 C.B.
228, and 66-110, 1966-1 C.B. 12, for information on the cost of
premiums paid by an employees' trust under a qualified plan for
current life insurance protection taxable to plan participants or
their beneficiaries.
Also include DEC distributions in this box.
Annuity starting date in 1998 or later. If you
made annuity payments from a qualified plan (under section 401(a),
403(a), or 403(b)) and the annuity starting date is in 1998 or
later, you must use the simplified method (under section
72(d)) to figure the taxable amount. Under this method, the expected
number of payments you use to figure the taxable amount depends on
whether the payments are based on the life of one or more than one
person. See Notice 98-2, 1998-1 C.B. 266, and Pub. 575,
Pension and Annuity Income, to help you figure the taxable amount to
enter in box 2a.
Annuity starting date after November 18, 1996, and before
1998. Under the simplified method for figuring the
taxable amount, the expected number of payments is based only on the
primary annuitant's age on the annuity starting date. See Notice
98-2.
Annuity starting date before November 19, 1996.
If you properly used the rules in effect before November 19, 1996,
for annuities that started before that date, continue to report
using those rules. No changes are necessary.
IRA or SEP. Generally, you are not
required to compute the taxable amount of a traditional IRA or SEP
nor designate whether any part of a distribution is a return of
basis attributable to nondeductible contributions. Therefore, report
the total amount distributed from a traditional IRA or SEP in box
2a. This will be the same amount reported in box 1. You may mark the
Taxable amount not determined box in box 2b.
However, for a distribution by a trust representing CDs redeemed
early, report the net amount distributed. Do not include any amount
paid for IRA insurance protection in this box.
For a distribution of contributions plus earnings from an IRA
under section 408(d)(4), report the gross distribution in box
1, only the earnings in box 2a, and enter Code 8 or P, whichever is
applicable, in box 7. You may also enter Code 1, 2, or 4, if
applicable.
For a distribution of contributions without earnings after the
due date of the individual's return, under section 408(d)(5),
enter 0 (zero). You might use Code 1 or 7 in box 7 depending on the
age of the participant.
SIMPLE. Enter the total amount
distributed from a SIMPLE in box 2a.
Roth or Ed IRA. For a distribution from a Roth
or Ed IRA, report the total distribution in box 1 and leave box 2a
blank. Use Code J or M, as appropriate in box 7. You may also use
Code 1, 2, 3, 4, 5, 8, or P, if appropriate, in box 7 with Code J
and Code 3, 4, 8, or P with Code M.
However, for the distribution of excess Roth contributions under
section 408(d)(4) or of excess Ed IRA contributions under section
530(d)(4), report the gross distribution in box 1 and only the
earnings in box 2a. Enter Code J or M and 8 or P in box 7.
Roth conversion. Report the total amount
converted or reconverted from an IRA, SEP, or SIMPLE to a Roth IRA
in boxes 1 and 2a. A conversion or reconversion is considered a
distribution and must be reported even if it is with the same
trustee and even if the conversion is done by a trustee-to-trustee
transfer. For a Roth conversion, use Code 2 in box 7 if the
participant is under age 59½ or Code 7 if the participant is at
least age 59½. Do not use Code J. Also, mark the IRA/SEP/SIMPLE
box in box 7.
Losses. If a distribution is a loss, do
not enter a negative amount in this box. For example, if stock is
distributed but the value is less than the employee's after-tax
contributions, enter the value of the stock in box 1, leave box 2a
blank, and enter the employee's contributions in box 5.
For a plan with no after-tax contributions, even though the value
of the account may have decreased, there is no loss for reporting
purposes. Therefore, if there are no employer securities
distributed, show the actual cash and/or fair market value (FMV) of
property distributed in boxes 1 and 2a, and make no entry in box 5.
If only employer securities are distributed, show the FMV of the
securities in boxes 1 and 2a and make no entry in box 5 or 6. If
both employer securities and cash or other property are distributed,
show the actual cash and/or FMV of the property (including employer
securities) distributed in box 1, the gross less any net unrealized
appreciation (NUA) on employer securities in box 2a, no entry in box
5, and any NUA in box 6.
Enter an X in this box only if the payment shown in box 1 is
a total distribution. A total distribution is one or more distributions
within 1 tax year in which the entire balance of the account is
distributed. If periodic or installment payments are made, mark this box
in the year the final payment is made.
For lump-sum distributions from qualified plans only, enter the
amount in box 2a eligible for the capital gain election under
section 1122(h)(3) of the Tax Reform Act of 1986, 1986-3 (Vol. 1) C.B.
1, 387, for participants born before 1936 (or their beneficiaries).
Enter the full amount eligible for the capital gain election. You should
not complete this box for a direct rollover.
To compute the months of an employee's active participation before
1974, count as 12 months any part of a calendar year in which an
employee actively participated under the plan; for active participation
after 1973, count as 1 month any part of a month in which the employee
actively participated under the plan. See the Example below.
Active participation begins with the first month in which an employee
became a participant under the plan and ends with the earliest of:
For a charitable gift annuity, see Charitable gift annuities on
page R-1.
Enter any Federal income tax withheld. This withholding under
section 3405 is subject to deposit rules, and the withholding tax return
is Form 945, Annual Return of Withheld Federal Income Tax. Backup
withholding does not apply. See below and Pub. 15-A, Employer's
Supplemental Tax Guide, and the Instructions for Form 945 for
more withholding information.
Even though you may be using Code 1 in box 7 to designate an early
distribution subject to the 10% tax specified in sections 72(q), (t), or
(v), you are not required to withhold that tax.
The amount withheld cannot be more than the sum of the cash and the
fair market value (FMV) of property (excluding employer securities)
received in the distribution. If a distribution consists solely of
employer securities and cash ($200 or less) in lieu of fractional
shares, no withholding is required.
To determine your withholding requirements for any designated
distribution under section 3405, you must first determine whether the
distribution is an eligible rollover distribution. (See Direct
rollovers on page R-2 for a discussion of eligible rollover
distributions.) If the distribution is not an eligible rollover
distribution, the rules for periodic payments or nonperiodic
distributions apply. For purposes of withholding, distributions from any
IRA are not eligible rollover distributions.
Eligible rollover distribution; 20% withholding.
If an eligible rollover distribution is paid directly to an eligible
retirement plan in a direct rollover, do not withhold Federal income
tax. If any part of an eligible rollover distribution is not a direct
rollover, you must withhold 20% of the part that is paid to the
recipient. The recipient cannot claim exemption from the 20% withholding
but may ask to have additional amounts withheld on Form W-4P, Withholding
Certificate for Pension or Annuity Payments. If the recipient is not
asking that additional amounts be withheld, Form W-4P is not required
for an eligible rollover distribution because 20% withholding is
mandatory.
Employer securities and plan loan offset amounts that are part of an
eligible rollover distribution must be included in the amount multiplied
by 20%. However, the actual amount to be withheld cannot be more than
the sum of the cash and the FMV of property (excluding employer
securities and plan loan offset amounts). For example, if the only part
of an eligible rollover distribution that is not a direct rollover is
employer securities or a plan loan offset amount, no withholding is
required. However, any cash that is paid in the distribution must be
used to satisfy the withholding on the employer securities or plan loan
offset amount.
The 20% withholding requirement applies to eligible rollover
distributions from a qualified plan distributed annuity contract. For
such a contract, the payer is required to withhold.
Any net unrealized appreciation excludable from gross income under
section 402(e)(4) is not included in the amount of any eligible rollover
distribution that is subject to 20% withholding.
You are not required to withhold 20% of an eligible rollover
distribution that, when aggregated with other eligible rollover
distributions made to one person during the year, is less than $200.
IRAs. The 20% withholding does not apply to
distributions from any IRA, but withholding does apply to IRAs under the
rules for periodic payments and nonperiodic distributions below. For
withholding, assume that the entire amount of an IRA distribution is
taxable (except for the distribution of contributions under section
408(d)(4), in which only the earnings are taxable, and 408(d)(5)).
However, do not withhold on a distribution from an Ed IRA.
A distribution from a Roth IRA, including a Roth conversion or
reconversion, is considered a designated distribution and is subject to
withholding under the rules for periodic payments and nonperiodic
distributions below. However, an individual may claim exemption from
such withholding.
An IRA recharacterization is not subject to income tax withholding.
Periodic payments. For periodic payments that are
not eligible rollover distributions, withhold on the taxable part as
though the periodic payments were wages, based on the recipient's Form
W-4P. The recipient may request additional withholding on Form W-4P or
claim exemption from withholding. If a recipient does not submit a Form
W-4P, withhold by treating the recipient as married with three
withholding allowances. See Circular E, Employer's Tax Guide
(Pub. 15), for wage withholding tables.
Rather than Form W-4P, military retirees should give you Form
W-4, Employee's Withholding Allowance Certificate.
Nonperiodic distributions. Withhold 10% of
the taxable part of a nonperiodic distribution that is not an eligible
rollover distribution. The recipient may request additional withholding
on Form W-4P or claim exemption from withholding.
Failure to provide TIN. For periodic
payments and nonperiodic distributions, if a payee fails to furnish his
or her correct TIN to you in the manner required, or if the IRS notifies
you before any distribution that the TIN furnished is incorrect, a payee
cannot claim exemption from withholding. For periodic payments, withhold
as if the payee was single claiming no withholding allowances. For
nonperiodic payments, withhold 10%. Backup withholding does not apply.
Enter the employee's contributions to a profit-sharing or
retirement plan, or insurance premiums that the employee may
recover tax free this year. The entry in box 5 may include any of the
following: (a) contributions actually made by the employee over the
years under the retirement or profit-sharing plan that were required to
be included in the income of the employee when contributed (after-tax
contributions), (b) contributions made by the employer but
considered to have been contributed by the employee under section 72(f),
(c) the accumulated cost of premiums paid for life insurance protection
taxable to the employee in previous years and in the current year under
Regulations section 1.72-16 (PS 58 costs) (only if the life insurance
contract itself is distributed), and (d) premiums paid on commercial
annuities. Do not include contributions to any IRA, DEC, 401(k) plan, or
any other contribution to a retirement plan that was not an after-tax
contribution.
Generally, for qualified plans, tax-sheltered annuities, and
nonqualified commercial annuities, enter in box 5 the employee
contributions or insurance premiums recovered tax free during the year
based on the method you used to determine the taxable amount to be
entered in box 2a. If periodic payments began before 1993, you are not
required to, but you are encouraged to, report in box 5.
If you made periodic payments from a qualified plan and the annuity
starting date is after November 18, 1996, you must use the simplified
method to figure the tax-free amount each year. See Annuity
starting date in 1998 or later on page R-5.
If a total distribution is made, the total employee contributions or
insurance premiums available to be recovered tax free must be shown only
in box 5. If any previous distributions were made, any amount recovered
tax free in prior years must not appear in box 5.
If you are unable to reasonably obtain the data necessary to compute
the taxable amount, leave boxes 2a and 5 blank, and mark the first box
in box 2b.
For more information, see Rev. Proc. 92-86, 1992-2 C.B. 495 and
section 72(d).
For charitable gift annuities, see Charitable gift annuities on
page R-1.
Enter an X in the IRA/SEP/SIMPLE checkbox if the
distribution is from a traditional IRA, SEP, or SIMPLE, or is a Roth
conversion. It is not necessary to mark the box for a distribution from
a Roth or Ed IRA or for an IRA recharacterization.
You must enter the appropriate code(s) in box 7.
Read the codes carefully and enter them accurately because the IRS uses
the codes to help determine whether the recipient has properly reported
the distribution. If the codes you enter are incorrect, the IRS may
improperly propose changes to the recipient's taxes.
When applicable, you may enter a numeric and an alpha code. For
example, when using Code P for an IRA distribution under section
408(d)(4), you may also enter Code 1, if it applies. Or for a normal
distribution from a qualified plan that qualifies for the 10-year tax
option, enter Codes 7 and A. For a direct rollover to an IRA for the
surviving spouse of a deceased participant, enter Codes 4 and G. Do not
use Code 4 with Code H.
Only three numeric combinations are permitted on one Form 1099-R:
Codes 8 and 1, 8 and 2, or 8 and 4. If two or more other numeric codes
are applicable, you must file more than one Form 1099-R. For example, if
part of a distribution is premature (Code 1) and part is not, file one
Form 1099-R for the part to which Code 1 applies and another Form 1099-R
for the part that is a normal distribution, Code 7. In addition, for the
distribution of excess deferrals, excess contributions, or excess
aggregate contributions, parts of the distribution may be taxable in 2
or 3 different years. Thus, file separate Forms 1099-R using Code 8, D,
or P to indicate the year the amount is taxable.
If part of an eligible rollover distribution is paid in a direct
rollover and part is not, you must file a separate Form 1099-R for each
part showing the appropriate code on each form. If part of a
distribution is an eligible rollover distribution and part is not (e.g.,
a minimum distribution required by section 401(a)(9)) and the part that
is an eligible rollover distribution is directly rolled over, you must
file a separate Form 1099-R to report each part.
Use the codes below for any amounts reported on Form 1099-R -
distributions from qualified plans, any IRAs, Keoghs, commercial
annuities, insurance contracts, charitable gift annuities, etc.
1 - Early distribution, no known exception.
Use Code 1 only if the employee/taxpayer has not reached age 59½,
and if none of the exceptions under section 72(q), (t), or (v) are known
to apply. For example, if a distribution is made for medical or
qualified higher education expenses, you probably will not know if any
medical or qualified higher education expense exception under section
72(t) applies. Therefore, use Code 1. However, if an early distribution
is made from a qualified retirement plan because of an IRS levy under
section 6331, use Code 2.
Even if the employee/taxpayer is 59½ or over, use Code 1 if a series
of substantially equal periodic payments was modified within 5 years of
the date of the first payment (within the meaning of section 72(q)(3) or
(t)(4)). For example, Mr. B began receiving payments that qualified for
the exception for part of a series of substantially equal periodic
payments under section 72(t)(2)(A)(iv) when he was 57. When he was 61,
Mr. B substantially modified the payments. Because the payments were
modified within 5 years, use Code 1 in the year the payments were
modified, even though Mr. B is over 59½.
2 - Early distribution, exception applies (as defined in section
72(q), (t), or (v)). Use Code 2 if the employee/taxpayer
has not reached age 59½ to indicate that an exception under
section 72(q), (t), or (v) applies. However, instead of Code 2, use Code
3 or 4, whichever applies, for an early distribution due to disability
or death. Also use Code 2 for a Roth conversion (an IRA converted to a
Roth IRA) or reconversion if the participant is under 59 4 - Death. Use Code 4 regardless of the age
of the employee/taxpayer to indicate payment to a decedent's
beneficiary, including an estate or trust. Also use it for death benefit
payments made by an employer but not made as part of a pension,
profit-sharing, or retirement plan.
6 - Section 1035 exchange. Use Code 6 to
indicate the tax-free exchange of life insurance, annuity, or endowment
contracts under section 1035.
7 - Normal distribution. Use Code 7 for a normal
distribution from a plan, including a traditional IRA, if the
employee/taxpayer is at least 59 8 - Excess contributions plus earnings/excess deferrals (and/or
earnings) taxable in 2000. Use Code 8 for an IRA
distribution under section 408(d)(4), including excess Roth
contributions, or the withdrawal of excess contributions from an Ed IRA,
unless Code P applies. Also use this code for corrective distributions
of excess deferrals, excess contributions, and excess aggregate
contributions, unless Code D or P applies. See Corrective
distributions on page R-3. Also see IRA revocation on page
R-2.
9 - PS 58 costs. Use Code 9 to report
premiums paid by a trustee or custodian for current life or other
insurance protection (PS 58 costs). See Box 2a on page R-5 for
more information.
A - May be eligible for 10-year tax option. Use
Code A only for participants born before 1936 or their beneficiaries to
indicate the distribution is eligible for the 10-year tax option method
of computing the tax on lump-sum distributions (on Form 4972, Tax
on Lump-Sum Distributions). To determine whether the distribution may be
eligible for the tax option, you need not consider whether the recipient
used this method (or capital gain treatment) in the past.
D - Excess contributions plus earnings/excess deferrals taxable in
1998. See the explanation for Code 8. Generally, do not
use Code D for an IRA distribution under section 408(d)(4).
E - Excess annual additions under section 415.
Do not use Code E with any other code.
G - Direct rollover to IRA. Use Code G for
the direct rollover from a qualified plan or tax-sheltered annuity to a
traditional IRA. Do not use this code for a distribution from an
IRA. Do not use this code with any other code except Code 4, when
applicable. See Direct rollovers on page R-2.
H - Direct rollover to qualified plan or tax-sheltered
annuity. Use Code H for the direct rollover of a
qualified plan or tax-sheltered annuity to an eligible retirement plan
other than a traditional IRA. Do not use this code with any other code.
Also, use Code H if you know the distribution is from a conduit IRA and
it is made payable to the trustee of or is transferred to an employer
plan.
J - Distribution from a Roth IRA. Use Code J
for a distribution from a Roth IRA or from a Roth conversion IRA. You
may use Code 1, 2, 3, 4, 5, 8, or P with Code J.
L - Loans treated as deemed distributions under section
72(p). You may use Code L with other codes, such
as Code 1 or 2. Do not use Code L to report a loan offset. See Loans
treated as distributions on page R-4.
M - Distribution from an education IRA (Ed IRA).
Use Code M for any distribution from an Ed IRA. You may use Code 3, 4,
8, or P with Code M.
P - Excess contributions plus earnings/excess deferrals taxable in
1999. See the explanation for Code 8. The IRS suggests
that anyone using Code P for the refund of an IRA contribution under
section 408(d)(4), including excess Roth contributions, or the
withdrawal of excess contributions from an Ed IRA advise payees, at the
time the distribution is made, that the earnings are taxable in the year
in which the contributions were made.
R - Recharacterized IRA contribution. Use
Code R for a recharacterization of an IRA contribution to another type
of IRA by a trustee-to-trustee transfer or with the same trustee.
S - Early distribution from a SIMPLE IRA in first 2 years, no
known exception. Use Code S only if the
distribution is from a SIMPLE IRA in the first 2 years, the
employee/taxpayer has not reached age 59
Start of Plain English Section
Comparisons
Contrasts
Start of Plain English Section Cost v. Benefit
Analysis ~ Its Value
Start of Plain English Section
Other
Start of Plain English Section
Reserved
Start of Plain English Section
Names to place on the 1099-R
Box 2a
Example for Computing Amount Eligible for Capital Gain
ElectionBox 2b - Total Distribution
Box 3
Box 4
Box 5
Box 7
Codes
Technical Analysis and Explanation
Commentary
Law
Regs
Cases
Revenue Procedures
Revenue Rulings
Private Letter Rulings
Commentary
Special rules are provided for the recharacterization of IRA contributions, including Roth IRA regular conversion contributions.Code Section 408A(d)(6) generally provides that, except as otherwise provided by the Secretary of the Treasury, an IRA contribution that is transferred to another IRA in a trustee-to-trustee transfer on or before the federal income tax return due date (with extensions) for the taxable year of the contribution is treated as made to the transferee IRA and not the transferor IRA. Code Section 408A(d)(6) requires that the transfer include allocable net income on the contribution and that no deduction be allowed for the contribution to the transferor IRA.
Comment: The intent of Code Section 408A(d)(6), as enacted, was to permit a taxpayer who had converted an amount held in a non-Roth IRA to a Roth IRA and later discovered that his modified AGI for the year of conversion exceeded $100,000 to correct the conversion by retransferring the converted amount to a non-Roth IRA.
The regulations interpret Code Section 408A(d)(6) liberally to provide broad relief to taxpayers who wish to change the nature of an IRA contribution (and not only to allow taxpayers to correct Roth IRA conversions for which they were ineligible). Moreover, the regulations make application of Code Section 408A(d)(6) elective by the taxpayer and permit the taxpayer to recharacterize all or any portion of an IRA contribution. Reg. Section 1.408A-5, Q&A-1(a). Thus, the regulations provide that in accordance with Code Section 408A(d)(6), except as otherwise provided, if an individual makes a contribution to an IRA (the first IRA) for a taxable year and then transfers the contribution (or portion thereof) in a trustee- to-trustee transfer from the trustee of the first IRA to the trustee of another IRA (the second IRA), the individual can elect to treat the contribution as having been made to the second IRA, instead of to the first IRA, for federal tax purposes.
The election procedures are discussed in Section 96.5(b).
§408A(d)(6) TAXPAYER MAY MAKE ADJUSTMENTS BEFORE DUE DATE
(A) In general-- Except as provided by the Secretary, if, on or before the due date for any taxable year, a taxpayer transfers in a trustee-to- trustee transfer any contribution to an individual retirement plan made during such taxable year from such plan to any other individual retirement plan, then, for purposes of this chapter, such contribution shall be treated as having been made to the transferee plan (and not the transferor plan).
(B) Special rules--
(i) Transfer of earnings-- Subparagraph (A) shall not apply to the transfer of any contribution unless such transfer is accompanied by any net income allocable to such contribution.
(ii) No deduction-- Subparagraph (A) shall apply to the transfer of any contribution only to the extent no deduction was allowed with respect to the contribution to the transferor plan.
Start of Revenue Procedures Section
Start of Private Letter Rulings
Tax Killers
Title 1
Title 2
Title 3
Title 4
Title 5
Title 6
This is about Activity Based Taxplanning - maximizing deductions, minimizing cash outlay and maximizing the amount of cash retained and the net worth. Activity Based Taxplanning (ABT) is a methodology developed by Bob Parrish CPA, that assists people with the tax issues by focusing on the activity (or actions - events) that are being undertaken or contemplated (or have already taken place). The, research is compiled from the myriad of sources to help you complete the activity with the least tax cost, while maintaining compliance the tax laws, other laws and regulations and place yourself in a position to protect your objectives.
Tax is a subject that many view in order to cut costs. Taxes are a cost just as any other cost. It happens this cost is somewhat intangible and is defined by legislation without a tangible item to view and control. The money is spent and the control of the expenditure is more appropriately administered by someone trained in the law.
Cost Killers
Title 1
Title 2
Title 3
Title 4
Title 5
Title 6
Management Info Sys, Decision Support Systems, Activity Based Management and Costing, Cost Accounting)
Prepare for Your CPA or Attorney (or prepare for doing this yourself)
Entrance Interview
From Your Other Business, or Financial Records
From Corporation or Organization Records (meetings, etc.)
About the Preparation Procedures
If you have decided this task must be done, the first procedure is to be certain you have all the facts important to this topic. So that you may know the value, to you personally, of this topic you must have facts of your circumstances. So that you may comply with applicable rules, you must have all the facts. Factual research is time consuming and if not performed wisely will be very expensive if not performed properly, and thoroughly. IF you decide to make this a do-it-yourself project you should seek the advice of a professional qualified in your jurisdiction to assist you with defining important information and then to overview the information you have gathered.
What to gather - an Organizer and Prepare for your CPA, Attorney or Financial Adviser
Organizer
From Your Other Business, or Financial Records
From Corporation Records or Organization Records (meetings, etc.)
Start of Preparing For You CPA Section
Do It Yourself - Forms Required to Be Filed, Checklists, Etc.
DO
IT YOURSELF
Action
Checklist - What To Do
PRINT ALL THE REQUIRED DOCUMENTS
OBTAIN THE STANDARD WORKPAPER FORMS NEEDED
Title 1
Title 2
Title 3
Title 4
Title 5
Title 6
How to do this - What to Do
GENERAL SETUP & STARTUP
PRINT FORMS AND DOCUMENTS NEEDED
PRESENTATION STANDARDS
STARTING - FIRST THINGS FIRST, OBTAIN WHAT YOU NEED
OBTAIN THE ORGANIZER AND BE CERTAIN ALL INFORMATION IS AVAILABLE
OBTAIN AND SORT THE INFORMATION
OBTAIN THE STANDARD WORKPAPER FOLDER SETUP
OBTAIN THE STANDARD PRESENTATION LAYOUT
OBTAIN & OPEN ALL STANDARD DOCUMENTS OR WORKPAPERS
OVERVIEW & BECOME FAMILIAR WITH THE ENTRANCE INTERVIEW FORM
OVERVIEW THE LIST OF INFORMATION AND CLIENT OR BUSINESS RECORDS NEEDED
START THE REQUIRED COMPUTER PROGRAMS
OBTAIN THE CHECKLISTS IF NEEDED AND WORK ON THE JOB BY EACH TYPE OF ACTIVITY OR EVENT
OBTAIN THE STANDARD WORKPAPER FORMS NEEDED
LIST OF THE STANDARD FORMS AND W/P NEEDED
OBTAIN THE DOCUMENTS FOR THIS JOB
PLACE BLANK FORMS IN THE CORRECT SEQUENCE
GENERAL & FOR ALL JOBS
Instructions for finalizing and completion - for example instructions for the mailing of forms to the IRS
Actions Checklist
Report Cover Letter
Required Documents and attachments
DOING THE WORK
PRINT ALL THE REQUIRED DOCUMENTS OR MAKE COPIES AS NEEDED
DETERMINE THE CORRECT PRESENTATION STANDARD TO USE
ENGAGEMENT LETTER AND DISCLAIMER
PRESENTATION IN GENERAL
WHAT THE ENGAGEMENT IS LIMITED TO
WHAT SERVICES WERE PERFORMED
HOW THIS HELPS & BENEFITS
4 WAY TEST APPLICATION
Is it the TRUTH
Is it FAIR
Will it build GOODWILL and BETTER FRIENDSHIPS
Will it be BENEFICIAL to all
OVERVIEW THE WORK
BEFORE FINALIZING THE WORK PROCESS CONSIDER THE FOLLOWING
Compliance
Paying Bills or other events
The professional should perform functions the client does not have time for
The professional should perform necessary functions the client staff does not have training for
Reduce Costs
Reduce Risks
Setting Goals or objectives
Setting methods for monitoring
Setting dates, methods & procedures for follow-up
Setting guidelines for defining when variances from the guideline warrant policy or procedure changes
Identify the policies or procedures that need to be changed to accomplish the goal or objective
FINAL OVERVIEW BEFORE THE JOBS IS ENDED & CLOSED
LOOK AT THE ORIGINAL QUESTION - has it been answered, were more questions added?
THE ANSWER - limit the answer to a short paragraph of about 7 sentences. Did this solve the issue? The ANSWER is not considered the SOLUTION
THE SOLUTION - understand the objective or goal and restate it. Were the goals met? What might prevent obtaining the goals. Do the benefits outweigh the costs? Reduce Costs? Reduce Risks? Setting Goals or objectives:
Setting methods for monitoring
Setting dates, methods & procedures for follow-up
Setting guidelines for defining when variances from the guideline warrant policy or procedure changes
Identify the policies or procedures that need to be changed to accomplish the goal or objective. State Remedial Solutions and Preventive Solutions.
ACTIONS - checklist, calendar, columnar presentation showing separate columns for Client, CPA, Broker, Bookkeeper, Lawyer, Insurance Agent, etc.
COST v. BENEFITS ANALYSIS
PROPOSAL
FACTS DISCOVERED & USED
COMPUTATIONS & REPORTS
TECHNICAL ANALYSIS WITH CITATIONS AND AUTHORITY
FORMS - agreements, contracts, trusts, tax forms, financial reports, management information reports, policies or procedures
REQUIRED ATTACHMENTS
Overview - look at the steps required and the steps performed. Are there unusual items? Are there exceptions or adverse results of the procedures performed? Find resolutions for all unusual or adverse items.
Compliance - has compliance "substantially" been met. That is no "material" adverse results?
Math Check
Proof and spell check
Theory & overview by someone not performing the procedures
Close the case and archive it.
Financial Accounting - Bookkeeping and Financial Statements
Financial Statement Presentation
Notes to Financial Statements
How to Make Entries
What Kind of Records to Keep
Bookkeeping Methods - Cash, Accrual and Other
How the Business Entity Affects the Recording
Financial Statement Presentation
Back to Start of Financial Accounting: Bookkeeping & Financials
Back to Start of Financial Accounting: Bookkeeping & Financials
Back to Start of Financial Accounting: Bookkeeping & Financials
Back to Start of Financial Accounting: Bookkeeping & Financials
Bookkeeping Methods - Cash, Accrual and Other
Back to Start of Financial Accounting: Bookkeeping & Financials
How the Business Entity Affects the Recording
Sole Proprietor
Corporation - C & S
Partnerships - General, Limited, Limited Liability Company, Registered Limited Liability Partnership or Company
Trusts
Tax Exempt
Back to Start of Financial Accounting: Bookkeeping & Financials
Compliance Requirements - Requirements, Defense, Protection, Etc.
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Title 6
Compliance Checklist
Back to Start of What is required for protection, defense, etc.
Alerts and Dangers
Action Checklist
Alerts & Dangers - Risks
Asset Protection
Your Defense
Title 5
Title 6
Back to Start of Alerts & Dangers
Back to Start of Alerts & Dangers
Back to Start of Alerts & Dangers
Back to Start of Alerts & Dangers
Tools - Spreadsheets - Documents - Checklists - Organizers
TOOLS
Spreadsheets & Math
Spreadsheets & Computations
Back to Start of Spreadsheets & Math
Sample Agreements - Trusts - Etc.
Title 1
Title 2
Back to Start of Contracts, Trusts, etc.
Required Reports
Title 1
Title 2
Back to Start of Reports Required
Checklist for Deployment
Title 1
Title 2
Checklists for Deployment
Back to Start of Checklists - Deployment
Checklist for Monitoring
Title 1
Title 2
Back to Start of Checklist - Monitoring
Index
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Analyses
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Plain English Analysis - Your Answers
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Do It Yourself
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How To Do This
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Increase Wealth
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Information Sources
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Introduction
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Procedures
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Tools
Contact Information
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