Form 1099-R sent in error?

[Guest Lonnie_parry]

I received a Form 1099-R which I don't think I should have gotten.

In 1998 I converted an IRA to a Roth IRA. In 1999 I had the account transferred from Company #1 to Company #2. This was transferred as a Roth IRA and is still a Roth IRA.

I just received a 1099-R for 1999 from Company #1. In Box 2a appears the amount which I transferred over to Company #2 as a Roth IRA. In Box 7 appears the Code J.

I get the impression that this form would be sent to me if I took a distribution from a regular IRA. As a Roth IRA I already started paying taxes on it in 1998. In addition, the amount which appears is not the amount converted to the Roth in 1998 but the amount transferred to Company #2 in 1999. I don't think this form should have been sent to me at all.

Do you agree?

[Michael Devault]

I sure do. The instructions for Form 1099-R clearly state that transfers between trustees or issuers that involve no payment or distribution of funds to the participant are not to be reported. The exception to this statement is direct rollovers from qualified plans, which have special codes for Box 7 to indicate such.

I suggest that you get the company that issued the 1099 to re-issue a corrected form. If that fails, show the distribution on form 1040 and a rollover of the same amount, netting zero as taxable. If the IRS questions it, make sure you keed accurate records of the transfer.

Good luck!

[Guest Paul McDonald]

Had almost the same thing happen to me. I spoke to the IRS and the company (custodian) involved. The IRS acknowledged that many companies believe they have to report something when the money moves from one place to another. In the event that the transferring company will not relent in their practice (even though the instructions to the Form 1099 clearly say NOT to) the IRS said you should report on your IRS Form 1040 the amount (claimed to be distributed) on Line 15a and enter a zero on line 15b. The person I spoke to said there was a greater chance of the IRS questioning an amount omitted from a filed Form 1099.

I was able to convince the custodian to issue a corrected 1099 to reflect a zero amount distributed.

I think it would make it a whole lot easier if the IRS would give the tranferring company a code to identify a trustee to trustee transfer to go along with the one they have for a directed rollover from a qualified plan.

The cusodian I dealt with kept calling the IRA a "Qualified Plan" (as in Sec. 401 of the Code) and as such they think they have to use the directed rollover code for trustee to trustee transfers or other such reasoning.

Good luck with your argument with them. I had to submit to the custodian exerpts from the Instructions to Form 1099 outlining how the form was to be used.

[Guest Lonnie_parry]

I phoned the transferring company earlier today. Yes they were relentless in saying that they "had to send a 1099-R...it's the law".

After much discussion and coercion, they finally agreed that there should be $0 in the taxable amount box and that the code needed to be changed.

I can't wait to see this corrected form they're sending. I'd still like to know the reason for generating a Form 1099-R.