Retirement Plan Withdrawals & Rollovers

Question 0

What tax Form is prepared and provided to the IRS for all retirement plan withdrawals or rollovers?

Answer 0

Form 1099-R

Question 1

True or False - A 1099-R is prepared for all retirement plan distributions/rollovers.

Answer 1

True

Question 2

T or F - Custodians transmit all 1099-Rs to the IRS.

Answer 2

True

Question 3

What two key pieces of data does the 1099 R contain?

Answer 3

Total distribution and taxable distribution.

Question 4

How does the 1099-R for a trustee-to-trustee rollover differ from that for a distribution to an account owner (whether it’s rolled over within 60 days or not)

Answer 4

It shows no taxable amount in the Taxable Distribution box. Also, the distribution is coded “G”.

Question 5

What are the two options for rolling over an employer retirement plan?

Answer 5

Best - Direct Rollover aka a “Trustee to Trustee” rollover. Check is made payable to the trustee/receiving institution for the benefit of “(FBO”) the participant. No withholding occurs. 1099-R shows no taxable amount and is coded “G”.

Indirect Rollover - check is made payable to participant, with 20% mandatory withholding. Participant has 60 days to rollover the full amount, and must come up with separate funds to cover the 20% amount withheld. A partial rollover will cause the amount not rolled over to be subject to taxes, and if applicable, penalties. 1099-R will show full amount distributed as taxable. Will not be coded “G”.

Question 6

What is the difference between the following:

Custodian to Custodian Transfer

Trustee to Trustee Rollover

Indirect Rollover

Direct Rollover

Answer 6

Custodian to Custodian Transfer
Trustee to Trustee Rollover
Direct Rollover

All of the above are terms for the same same thing. Funds are transferred directly from one trust the (custodian) to another either electronically or via a check made payable to the receiving institution fbo the account owner.

Indirect Rollover (sometimes just called a Rollover)

A rollover in which the distributed funds are made payable to the account owner. The owner then as 60 days to deposit the funds into an IRA or qualified retirement plan to avoid income taxes, and if less 59 1/2, a 10% penalty. Further, the 60 Day rule is triggered, and the owner can’t perform another 60 day rollover for 12 months. For employer plans, mandatory 20% withholding is triggered.

Question 7

Distributions to account holders from which of the following types of retirement plans are subject to mandatory 20% withholding:

A. Qualified Plans

B. IRAs

Answer 7

A

Question 8

How does executing a completed 60 day rollover impact the ability to execute subsequent 60 day rollovers or IRA distributions?

Answer 8

If a 60 day (indirect) rollover is completed (funds distributed and then deposited to another IRA or qualified plan within 60 days), then another 60 day rollover cannot be executed from any IRA (or qualified plan?) for a full 12 months.

Question 9

T or F

A person with multiple IRAs can execute sequential 60 day rollovers from different IRAs without being restricted by the twelve month limitation on a single IRA

Answer 9

False. The 12 month restriction applies all IRAs owned by that person.

Question 10

For an employer plan containing company stock, what special considerations are necessary (Ed Slott)

Answer 10

Be careful about rolling over accounts with highly appreciated company stock Could miss big tax break. Talk to the Accountant (Need to research rules and provide more data)