Got a letter today from the IRS saying I owed $8K ($6500 in tax, $1500 interest & penalties) from my 2016 taxes. :eek:
Looking into it, in December 2016, I requested a rollover check from a company that held a small 401K ($28K). They cut the check on 12/27/16. I received it and forwarded it to my current 401K in January of 2017. So the distribution was shown as a 2016 transaction, even though it probably wasn’t even mailed in 2016, because of the holidays.
So lucky me, now I have to convince the IRS that I don’t owe diddly. Fun.
So I had something similar happen (to the tune of, lets see, $72,000!). In my case it was stock options that I had reported wrong. I wrote a letter to the IRS, explaining everything, attached all the documentation I had, and the whole matter was resolved with a single letter by me, and a response from them six months later that said “ok, you are good” (in IRS-ese of course). So don’t sweat it and honestly it probably won’t be that big of a deal.
ETA: And I’ve ALMOST made the same mistake - requesting a rollover in December. Then realized that was probably not going to work out well on the tax forms.
Like spit. I even had Fidelity tell me they couldn’t do a rollover or merge two accounts - two FIDELITY accounts - without my requesting my previous employer write a check to my new employer. RIDICULOUS.
My wife just finished rolling over several previous 401’s and IRA’s into Vanguard. It was a pain but it was all done electronically. I guess the 401’s were the teacher style (403?) but I’m not sure if that is the difference. Anyway, not one required a printed check.
Did the original 401k send you a 1099-R? They should have - with a distribution amount of $28k in box 1, and a taxable amount of $0 in box 2a. That should be all you need to send to the IRS.
If they didn’t send you one, call and bitch, because they were absolutely required to.
I recently got a similar letter from the IRS about some stock sales from 2016. Apparently I figured out the cost basis incorrectly and I was informed of the error of my ways. The amount wasn’t small, but it also wasn’t large enough that I dug into the math to determine if I agreed with their assessment.
But your number is bigger and you understand exactly what happened, so good luck.
yeah, this. People think the IRS is this big scary death star full of stormtroopers, but they’re actually very easy to work with (relatively speaking) as long as you make good faith effort to work with them. They’re also perfectly able to figure out the differences between a mistake or oversight (like this) and outright fraud or evasion. they just want to get you current on what you owe/owed.
yeah, this is another backwards thing. I’ve only done one rollover which had to be done by check, and IIRC the way I was advised to do it was have the previous institution address the check to “(new financial institution) FBO* (my name.)” When I received the check I just passed it along, so it didn’t get triggered as a distribution to me.
Except when my company switched from Kemper to Vanguard, I got a similar letter from the IRS. I called Kemper and they said, “Oh yeah, we coded the transfer wrong.” Fortunately, I was able to send copies of my statements to show that the time between leaving Kemper and arriving at Vanguard was too short for me to have actually received the funds, and everything was straightened out.
I feel your pain, except in my case it was $35K. The IRS sent the forms to the wrong processing center, or something.
How I handled it -
[ul][li]Panic[]Tell my wife, who told me not to panic[]Call Peg, our tax accountant[]Peg, may God bless and keep her pencils sharp, told me not to panic[]Peg went into her Super Accountant mode and pulled together the documentation proving every line, every figure, every coffee stain, on every tax return we have filed since the dawn of time[]Sent it all off to the IRS[]We got back a nice polite “never mind - our bad - you don’t owe anything” from the IRS[/ul]So it might not be as bad as it seems.[/li]
Regards,
Shodan
Partially correct. You have 60 days to deposit that check into a qualified account. After 60 days it becomes a taxable event (that form is just a) showing the distribution and b) showing no tax withheld).
What you need to do is provide the IRS with the 1099-R and also the proof of the deposit into an qualified account, which I believe is Form 5498 (I may be wrong on the number but the receiving firm will provide that if you ask).
Very good! I had something similar happen to me because of the complication of filing taxes overseas. I was able to recalculate the taxes and got it down to zero. Feels good.