Roth IRS distributed 12000, put back 2000, how to report?

Technical topics regarding tax preparation.
#1
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Facts:
- The taxpayer takeout 12000 from Roth IRA (opened within 5 years)
- and the within 60 days, put back 2000 (the IRA bank treated it as direct contribution)

How do I report the 2000 put back? Thanks.
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#2
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Enter it into the software as a rollover. If you state the software you're using, someone else may be able to tell you where the data gets entered.
Dave

Taxation is the price we pay for failing to build a civilized society. ~ Mark Skousen
 

#3
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SlipperyPencil wrote:Enter it into the software as a rollover. If you state the software you're using, someone else may be able to tell you where the data gets entered.

I tried to enter an rollover, but it appears in the form 1040 that I had 12000 distribution plus a 2000 rollover. The 2000 rollover does not reduce the 12000 distribution. I am mostly interested in the final result in the form, but I am using Intuit's ProConnect Tax Online.
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#4
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So it seems like there are two possible interpretations of the facts:
1. Taxpayer withdrew $12k but did an indirect rollover of $2k. Report $12k on line 4a and $0 on line 4b (assuming that the $10k was a qualified distribution or a distribution of basis; otherwise report $10k on line 4b). Also write the word "Rollover" next to that line.
2. Taxpayer withdrew $12k and also made a $2k Roth contribution. Report $12k on line 4a and $0 on line 4b (assuming that the $12k was a qualified distribution or a distribution of basis; otherwise report $12k on line 4b). Report the Roth contribution on Form 8880 line 1 (assuming that he was eligible to contribute to a Roth IRA; otherwise withdraw the excess contribution or pay a 6% tax on Form 5329).

So maybe you could fill in some extra facts for us. But hopefully both interpretations will lead to the same result.
 

#5
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beardenjv wrote:So it seems like there are two possible interpretations of the facts:
1. Taxpayer withdrew $12k but did an indirect rollover of $2k. Report $12k on line 4a and $0 on line 4b (assuming that the $10k was a qualified distribution or a distribution of basis; otherwise report $10k on line 4b). Also write the word "Rollover" next to that line.
2. Taxpayer withdrew $12k and also made a $2k Roth contribution. Report $12k on line 4a and $0 on line 4b (assuming that the $12k was a qualified distribution or a distribution of basis; otherwise report $12k on line 4b). Report the Roth contribution on Form 8880 line 1 (assuming that he was eligible to contribute to a Roth IRA; otherwise withdraw the excess contribution or pay a 6% tax on Form 5329).

So maybe you could fill in some extra facts for us. But hopefully both interpretations will lead to the same result.

beardenjv, #1 is the taxpayer's intension as he cannot make a direct ROTH IRA contribution. I agree with what you said with an addition that on the rollover line, there should also be a rollover amount of 2k. The questions remain:

- Will the IRS be able to interpret correctly that out of 12k distribution, 2k was rollover, leaving 10k as the net distribution? That is, will their software interprets this so that it will not generate a notice?
- When putting back the 2k, should the taxpayer do something differently, like filling out some kind of form to indicate his intention, that a different 1099-R will be generated with only 10k as distribution amount?
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#6
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I see. I was afraid of that.

In our experience, it seems that the IRS system may or may not pick up on discrepancies in rollovers claimed on Form 1040 v. rollover contributions reported on Form 5498. You could try treating the $2k as a rollover and take your chances, if you feel like that's really what happened.

If the taxpayer decides to withdraw the excess Roth contribution, he should just tell the bank that that's what he's doing, and they should handle all the paperwork accordingly. (I'm sure they'll do an awesome job just like they did the first time.)
(Or maybe instead he should just ask them to file a corrected Form 5498 showing the $2k as a rollover.)
 

#7
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beardenjv wrote:So it seems like there are two possible interpretations of the facts:
1. Taxpayer withdrew $12k but did an indirect rollover of $2k. Report $12k on line 4a and $0 on line 4b (assuming that the $10k was a qualified distribution or a distribution of basis; otherwise report $10k on line 4b). Also write the word "Rollover" next to that line.

To produce the desired effect as described above, I think this should what should be reported:

    Report a 1099-R distribution of 10,000
    Report a 1099-R rollover 2000
This will have the effect of:

    12000 on line 4a
    Rollover next to the line
Line 4b is a consequence basis, exception, etc. as what you would do with a normal 1099-R.

I had another case In 2020 that a Wells Fargo RMD distribution was reversed due to Covid. The form 1099-R was not cancelled, but only a "Rollover contribution" of the same amount was indicated on form 5498. There was no 1099-R with code G was issued.
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