IRA Transfer, Direct Rollover, or Rollover?
In trying to move a brokerage account Traditional IRA to a more than 2-year old brokerage account SIMPLE IRA, there’s confusion about the terminology and whether the once per 12-month rule applies. The money would move directly from the current custodian to the new custodian without going through the hands of the IRA owner.
The IRA owner completed account transfer paperwork at the receiving firm, which was sent to the sending firm through the ACAT system. The sending firm wants to issue a 1099-R for the Rollover because of the plan type differences (Traditional IRA to SIMPLE IRA). Many terms such as transfer, rollover, direct rollover, and indirect rollover are being used to describe the transaction.
Does anyone know if the above would count as a once per 12 month rollover and if the 1099-R should be issued? I’m guessing it won’t be taxable even if the 1099-R is issued and if the 12 month rule isn’t violated.
Permalink Submitted by Alan - IRA critic on Tue, 2020-09-22 20:03
There should be no 1099R since this transaction was a direct trustee to trustee transfer between IRAs as described on p 6 of the 1099R Inst under Transfers. The issue of a 1099R is problematic with respect to the one rollover rule limitation, and may also be problematic if no 5498 is issued by the SIMPLE IRA custodian. This 1099R should not be issued but until this is resolved the IRA owner should avoid any 60 day rollovers.
Permalink Submitted by David Mertz on Wed, 2020-09-23 03:28
A SIMPLE IRA is a type of traditional IRA. With respect to the movement of funds between these two accounts (after the 2-year holding period for the SIMPLE IRA) these are the same type of account, a traditional IRA, so this is a trustee-to-trustee transfer that is not to be reported on Form 1099-R as explained in the reference provided by Alan-iracritic.