Form 1040 Return-Reporting IRA, SEP and SIMPLE Direct-Rollover or Rollover to: Solo 401k | Self-Directed Solo 401k | Solo K | Individual 401k

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 the Solo 401k plan or Individual 401k is reportable but not taxable if 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 1040

Links to Forms 1099-R, and Form 1040

Form 1099-R: http://www.irs.gov/pub/irs-pdf/f1099r.pdf

Form 1040: http://www.irs.gov/pub/irs-pdf/f1040.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 the total distribution amount from your SEP, SIMPLE or Traditional IRA.
    • Box 2a–the taxable amount, displays the 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 a year of distribution.

SEP, SIMPLE and IRA Reporting on Form 1040  

  • Entire distribution goes on line 4a of Form 1040.
  • Enter 0 in box 4b of Form 1040 since you deposited funds in Self-Directed Solo 401k bank/brokerage account. Remember to write “rollover” next to the amount, and to attach a copy of your solo 401k bank account/ statement showing the funds having been deposited.

IRA Company Won’t Cooperate QUESTION:

The IRA company where I had my funds transferred to my self-directed solo 401k won't cooperate in correcting the Form 1099-R they incorrectly issued with a code 1 in box 7 to list a code G instead, so what should I do?

If you can’t get the IRA company to update the Form 1099-R to report it as a non-taxable direct rollover by using a code “G” in box 7, then another option is to treat it as a 60 day rollover.
As long as you deposited the funds into the solo 401(k) bank account within 60 days from the date you received the check, the other option is to treat it as a 60 day rollover. Following is how a sixty-day rollover is reported on your Form 1040.
  • Entire distribution goes on line 4a of Form 1040.
  • Enter 0 in box 4b of Form 1040 since you deposited funds in Self-Directed Solo 401k bank/brokerage account. Remember to write “rollover” next to the amount, and to attach a copy of your solo 401k bank account/ statement showing the funds having been deposited.

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About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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