Question: My taxes are still straightforward and I processed them online again just a couple days ago…all was good, until my previous employer finally just sent me my 1099-R in the mail in regards to the 401k contributions. Because I already submitted everything, this was not accounted for…is that going to be a problem? Or is there a way to add this?
A.J.: Was the 1099-R for taking money out of your 401k?
Response: It just shows distributions…but I never took money out..I rolled it over to my new employer’s 401k.
Answer: Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., should have been reported on your return as a non-taxable 401K transfer. You have two options to address this.
1) The proactive option is to amend your tax return by filing Form 1040x, Amended U.S. Individual Income Tax Return. If you choose this option then you would explain in the note section of Form 1040X that your previous employer provided you the 1099-R late and attach a copy of the 1099-R with the 1040X return.
2) The reactive option is to wait to see if the IRS does anything. The IRS may send you a letter 1 to 2 years from now stating that a 1099-R you received was not reported. In this letter, the IRS will propose an adjustment to your return by including the 1099-R as unreported income. You will need to respond to the IRS by composing a letter explaining that your previous employer provided you the 1099-R after you filed your return and the 1099-R is not taxable. You would also attached a copy of your 1099-R to your letter.
Either way, you will be fine.
IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.