After confirming that your SEP, SIMPLE or Traditional IRA direct-rollover or rollover to your new Solo 401k or Self-Directed Solo 401k has been properly reported on form 1099-R by the releasing financial institution, the next step is to report the direct rollover/rollover deposit to IRS on your form 1040A or 1040 tax return. Note that form 1040EZ does not allow for reporting of direct-rollover/Rollover.
Direct Rollover vs. Rollover
IRA, SEP, SIMPLE Direct-Rollover to Solo 401k plan or Individual 401k is only reportable but not taxable.
IRA, SEP, SIMPLE Rollover to Solo 401k plan or Individual 401k is reportable but not taxable as long as funds are deposited to Solo 401k account within 60 days from date check was received (constructive receipt).
The 1099-R you received will help you differentiate the direct rollover and rollover for proper reporting on Form 1040.
Visit following blog post to view 1099-R reporting chart: https://www.mysolo401k.net/Blog-for-MySolo401k.html?entry=2011-form-1099-r-ira
Forms needed to properly report direct rollover or rollover on your tax return:
- Form 1099-R (provided by releasing custodian financial institution usually by January 31)
- Form 1040A or 1040 (Note that form 1040EZ does not apply)
Links to Forms 1099-R, and 1040A and 1040
Form 1099-R: http://www.irs.gov/pub/irs-pdf/f1099r.pdf
Form 1040: http://www.irs.gov/pub/irs-pdf/f1040.pdf
Form 1040A: http://www.irs.gov/pub/irs-pdf/f1040a.pdf
What Form 1099-R Communicates
Direct Rollover
- Box 1 reflects total distribution amount from your SEP, SIMPLE or Traditional IRA.
- Box 2a–the taxable amount, should read 0 for direct rollover since the check was made payable to your Solo 401k f/b/o your name as Trustee
- Box 7 contains code G–direct rollover
IMPORTANT: If any other code besides code G is listed in box 7, contact the releasing IRA institution right away to make the correction to code G.
Rollover
- Box 1 of the Form 1099-R reflects total distribution amount from your SEP, SIMPLE or Traditional IRA.
- Box 2a–the taxable amount, displays same amount displayed in box 1.
- Box 7 contains either code 1 if you were under age 59 1/2 or code 7 if you were age 59 1/2 or over in year of distribution.
SEP, SIMPLE and IRA Reporting on Form 1040
- Entire distribution goes in box 4a, and enter 0 in box 4b and write “rollover” next to the amount since you deposited funds in Self-Directed Solo 401k checking account
