Reporting IRA and 401(k) Rollovers on the 1040

It is that time of year when you may have rolled over funds during 2018 from a previous IRA or 401(k) to your new self-directed IRA or self-administered 401(k) plan. While you may not consider this rollover a distribution (“John, I just rolled over the funds as a non-taxable rollover”), the IRS does still consider this to be a distribution….it is just a matter of whether or not is is taxable to you. In short, if you moved 100% of your rollover to the new IRA or 401(k) in the name of the IRA or plan, and report everything correctly, it will be a non-taxable distribution.

How do I know how much to report (hint: think 1099-R)

Well, for the majority of you, you will know as it will be the entire amount that you rolled over. But, let’s break it down:

When you rollover funds from either a previous IRA or old 401(k) plan, the custodian/administrator is going to send you and the IRS a 1099-R form which will show the entire amount of the distribution that they distributed. The good news is provided the rollover check was to not to you (there are some limited exceptions), and the  previous custodian/administrator correctly coded the form with a “G” coding, this code tells the IRS that the distribution is a non-taxable rollover. But, even if this is done correctly, it does not preclude you from also reporting this distribution/rollover on your 1040. Think of the concept of the “left and right hands” doing the same thing.

Reporting the rollover on your 2018 1040

You probably wouldn’t know this, but over the years, the reporting requirement of an IRA or 401(k) distribution virtually has not changed on the 1040. For 2018? It has changed! There is no sense regurgitating the old rules, so let’s indicate how you need to report the rollover for 2018.

Here’s a tip:  If you have IRA distributions and/or other retirement plan distributions, unlike in prior years when you entered these amounts on different lines on the 1040, you will now combine any and all sources and report these distributions on the same line! In all previous years, there were two lines: one to report IRA distributions and the second line to report qualified plan rollovers.

For the 2018 1040, this will now be accomplished through Line 4 (a & b). The basic premise of the reporting is still the same, but let’s use the following examples:

Rolling over your IRA (non-Roth) to Solo-K plan

*Enter the entire amount of the distribution reported on the 1099-R (box 1) on Line 4(a)

*Write “Rollover” next to Line 4(b)

*If the total distribution was rolled over to the plan, enter -0-

I always suggest attaching a brief note…it can be very brief…stating you executed a non-taxable rollover from your IRA to a Qualified Plan (e.g., 401(k)).

More That One Distribution?

If you  received more than one distribution (e.g., rolling over more than 1 IRA or old employer’s 401(k) that you rollover over to your 401(k), rinse and repeat. Enter the total amount on Line 4(a) and the taxable amount to you (should be $0) on Line 4(b).

Remember the tip above.

Rolling over a previous employer’s 401(k) to Solo-K

*Enter the entire amount of the distribution reported on the 1099-R (box 1) on Line 4(a)

*Write “Rollover” next to Line 4(b)

*If the total distribution was rollover over to the plan, enter -0-.

Again, I always suggest the brief note as well. And remember the tip above.

Rolling over a previous employer’s 401(k) to your Self-Directed IRA

Same as above, just different actors.

Please note that there are other types of rollovers from other plans (e.g., 403(b), 457) to your IRA or 401(k). Same basic rules apply. The key is that you report this!

Finally, do not forget your CPA or online tax services!

You should always review your rollover with whichever service you are using to make sure it is reported correctly.

If you don’t report?

Give the IRS about 2 years and they will send you a letter asking for tax dollars they think you owe them since you did not report the rollover on your 104o. Moral of the story….just do it and don’t forget. There is no sense putting yourself in that position.

As always, any information provided is not intended, nor should be interpreted, as tax, legal, financial or investment advice. You must always consult with your respective tax or legal professional on all such issues.