1099-R error by IRA custodian
L1: 1099-R error by IRA custodianLast year we moved my wife’s IRA from its custodian for the last 10 years (Guardian) to Merrill-Edge. We’d been taking a SEPP on this since 2002.
Incompetence of the Merrill-Edge staff handling this resulted in delays in getting the SEPP going again until 2012. As a result we had to arrange ad-hoc distributions for the last quarter of the year so that the annual amount distributed would match that for all previous years.
We got 1099-R forms from both Guardian and Merrill-Edge. The former, as expected, had a 2 in Box 7. Unfortunately, the one from Merril-Edge had a 1 in this box.
I have a letter (13 Feb 2012) from M-E that states, “Regrettably, we are unable to adjust the 2011 tax reporting statement (1099-R) at this time and we recommend that you consult with your tax advisor in regards to filing an IRS form 5329 with your tax return.”
I’ve looked at the 5329 and am wondering if it is sufficient to simply put the entire annual amount on Part 1 Line 2 with a 2 as the exception number.
After all, the amount reported on this line will be equal to the amount reported every year since 2002. Substantially Equal Periodic Payments, right?2012-03-29 21:27, By: SLS, IP: [18.104.22.168]
L2: 1099-R error by IRA custodianYou may get another opinion, but…
Form 5329 asks for the amount included in your income on line 1and line 2 asks for the amount on line 1 to which the exemption would apply.
Based on what the form is requesting, the amount on both line 1 & 2would be the amount on the 1099 that received a code of ‘1’. Your code onthe 5329 would be a ‘2’.
If you get audited, merely have the documents ready to justify the facts.
2012-03-29 22:03, By: Gfw, IP: [22.214.171.124]
L2: 1099-R error by IRA custodianYour posting is confusing.
As long as the annual total of the 2 accounts is the same as all other years, there is no problem. Code 1 vs code 2 is immaterial, other the easy process that all tax software has for creating a form 5329. Also, the fact that you might have had 2 or even 3 payments in one month, or the equivalent of multiple months, is likewise immaterial. The frequency of payments during a year, or one year vs another, is likewise immaterial.
If, however, they missed one or more payments in 2011, and caught up in early 2012, that is a different issue. If so, I’ll answer you with what I, and most practitioners, do in that situation. ( We just had a discussion of this on the PA tax list-serves.)2012-03-29 22:04, By: dlzallestaxes, IP: [126.96.36.199]
L2: 1099-R error by IRA custodianAs long as the total 1099R Box 1 amounts equal your annual SEPP distribution, you have no real problem.
With respect to the 5329, I agree with gfw that the line 1 amount should only be the amount on the 1099R coded 1 (early) and line 2 should be the same with exception code 02 on the internal line. Line 3 is -0-. This form only addresses “early distributions” and the 1099R from Guardian does not show an early distribution so you do not need to correct that one. Most custodians refuse to provide the exception code, therefore ML is more typical and the IRS is used to getting these 5329 forms on SEPP plans.2012-03-30 03:03, By: Alan S, IP: [188.8.131.52]