60 day IRA rollover extension – partial rollover, tax withholding, California compliance
If someone took their IRA distribution and withheld taxes in February, can they rollover only a portion of the IRA distribution? If taxes were withheld, can they rollover the gross before taxes?
Has California complied with the extension until July 15?
Many thanks as always … Mary Dean
Permalink Submitted by Alan - IRA critic on Tue, 2020-04-21 17:08
Yes, CA recognizes the extension for rollovers of distributions made 2/1 or later to 7/15. If taxes were withheld, the gross distribution should be rolled over using other funds to replace the withheld amount. Of course, it someone does not want to roll over the gross amount, they can roll back any portion they choose to and will be taxed on the remainder.
Permalink Submitted by Mary K. Dean on Wed, 2020-04-22 15:57
If there is a partial rollover, how will the brokerage firm report it to the IRS? Will it reduce the 1099? If there is no correcting 1099, does the client just inform his CPA? Schwab said to journal the partial rollover to the IRA and indicate “2020 rollover.”
Permalink Submitted by David Mertz on Wed, 2020-04-22 16:09
A rollover has no effect on the reporting on Form 1099-R of the distribution from the IRA; the distribution still happened whether rolled over or not and the Form 1099-R does not change as a result of the rollover. The rollover is reflected in how the distribution is reported on the individual’s tax return. The receiving IRA custodian reports receipt of a rollover contribution on Form 5498 which will corroborate the reporting on the tax return.