From 1099-r

[Earleen Muffley]

When would the "taxable amount not determined" box be checked on the 1099-R? I have a single member plan (Solo) that came to me asking what is involved to terminate the plan. I asked if ROTH deferrals were made in addition to employer. The answer was yes. I was told that all contributions were deposited into a single investment account.

As I write this, how can he roll his account over to an IRA? He can't roll it all into a ROTH IRA and at the same time he wouldn't want to roll it all into a traditional IRA and lose the tax benefit of the ROTH deferrals. He is facing a conundrum. That said, all I am tasked to do is prepare a final form 5500 and a 1099-R based on the information provided to me. I can (and will) advise what he should do. What he ultimately does is his choice.

If the taxable amount is not determined on your 1099-R, it means that the tax-free portion of your annuity has not been calculated12. If you did not make any non-deductible contributions, the entire amount would be taxable1. If there is no amount in Box 2a on your 1099-R, the taxable amount is the amount in Box 13. If there is an amount in Box 5, this may be subtracted from the amount in Box 13. If the Form 1099-R shows an amount in box 2a and box 2b Taxable amount not determined is not marked, the IRS is going to go by the box 2a figure.

That said, there are other issues at play here. For one, I don't think your client has a qualified Roth contribution program at all. The statute under 402A(b)(2) is clear that separate accounting is required for the Roth portion of the employee's account.

Second, since the distribution is bifurcated into Roth and non-Roth portions, you will need to know how much of the account is attributable to Roth and non-Roth contributions. This is true regardless of how the rollover is being done. If the non-Roth portion is being rolled over into a traditional IRA, then you need to know how much is being sent to that account. If the non-Roth portion is being rolled over into a Roth account, then you need to know the amount since it will be taxable in the year of the distribution (note that the taxable amount shown on the 1099-R would not be zero in this case, even though it is a direct rollover).

Note that a Roth account in a qualified plan may only be rolled over to a Roth IRA or to a Roth account in another plan. It can not be rolled over into a traditional IRA. See the IRS rollover chart here: -tege/rollover_chart.pdf

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

As I write this, how can he roll his account over to an IRA? He can't roll it all into a ROTH IRA and at the same time he wouldn't want to roll it all into a traditional IRA and lose the tax benefit of the ROTH deferrals.

I agree, and thank you for your posts. One thing I need to learn is to pass on a potential client who comes to me with a mess. That said, helping them clean up a mess can be profitable. I need to keep in mind that building a book of business, establishing yourself doesn't happen overnight. Slow and steady wins the race.

Basically, if you can account for the 2 money types separately, I think you're fine as far as plan qualification goes. Although, it may depend on the following question's answer - How many years has this cohabitation-of-monies been occurring? If not too many, shouldn't be hard to create a spreadsheet to separate the 2 year over year.

I actually came to BL looking for an answer about the need to prepare 2 1099-Rs, and saw your other post about it. I may copy (with credit to you), but change the circumstance in my post, if you're ok with that. Thanks!! ?

Most payees receive only one 1099-R tax form each year. However, persons who retired in the current tax year will receive a separate 1099-R tax form for any additional refunds they received, such as a refund of voluntary annuity contributions.

Additionally, retirees who turned age 59 in the current tax year will receive two 1099-R forms. These retirees will receive a 1099-R form for annuity payments distributed in the calendar year prior to reaching age 59 with a distribution code 2. They also will receive a separate 1099-R form for annuity payments distributed in the calendar year on or after they reached age 59 with a distribution code 7.

This is the taxable amount of your pension benefit. Depending on your retirement date, retirement type and whether you contributed to your plan, you may not be taxed on the total amount of benefits paid to you. If this is the case, the amount shown in this block will differ from the amount in Block 1.

This is the amount of your contributions that were recovered, tax free, during 2014. The dollar figure in this box does NOT represent the amount of any health insurance premiums withheld from your pension benefit.

For retirees who received their first pension benefit in the current tax year, this block contains the value of any contributions made during employment that can be recovered tax-free. Only members who retired in the current tax year and made pension contributions will see a value in this block. For members who retired prior to the current tax year, a zero will be printed in the block.

Any Maryland State income tax deducted from your monthly benefit is shown in this block. To change the amount of Maryland state income tax being withheld, complete Form 766.11: Maryland State Tax Withholding Request

This figure applies to members whose employers participated in the State Pick-up Program. Your participation was determined by whether your employer elected to participate and by whether your pension plan required you to make employee contributions.

You do not need to make any special entries on your federal tax form. The Maryland State Retirement Agency has included your pick-up contributions when computing the taxable amount of your pension for federal tax purposes.

Maryland State taxes
You have already paid Maryland State taxes on the pick-up contributions listed on your 1099-R. To avoid paying taxes twice, you must subtract the pick-up amount from your federal adjusted gross income.

For members who ended active employment and retired in the current tax year, the W-2 form you receive from your former employer will show 1) your annual wages earned prior to retirement and 2) any state pick-up contributions made in the current tax year. This state pick-up amount serves as an addition to state income for the current tax year. Enter this figure on line 3 of your Maryland tax return (Form 502).

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You may find that Treasury staff use the terms "wage statements" and "income record forms" interchangeably. However, wage statements are technically a subset of income record forms. Wage statements refer to Michigan (state) copies of Forms W-2, W-2 C. Income record forms are Michigan (state) copies of Forms W-2, W-2 C, W-2 G, 1099-R, 1099-MISC, and 1099-NEC.

The IRS determines if a person or business paying compensation to another person or business has an employee or contractor relationship. Generally, the type of income record form issued depends on the relationship (W-2s for employer/employee relationships; 1099s for independent contractor/non-employee relationships). As it relates to income tax, an employee relationship requires an employer to withhold on wages; in a contractor relationship, the worker is responsible for their own income tax. Generally, a contractor can request withholding from their pay. The business receiving contractor services could agree to withhold on the contractor's behalf.

Michigan follows federal withholding guidelines. For further information on determining of you have an employee or contractor relationship with someone who works for you, refer to IRS Publication 15, Employer's Tax Guide (Circular E) and the Michigan Unemployment Insurance Agency (UIA) Fact Sheet 155.

Historically, Form 1099-MISC was used to report miscellaneous income and nonemployee compensation. However, beginning tax year 2020, nonemployee compensation has a stand-alone form: 1099-NEC. Form 1099-MISC is now used to report truly miscellaneous income like royalties, rents, prizes/awards, crop insurance, etc.

Treasury requires state copy filing of Form 1099-MISC per MCL 206.707(1). Treasury requires state copy filing of Form 1099-NEC per Internal Revenue Code (IRC Chapter 61; Section 331). While Form 1099-NEC is included in the Combined Federal/State Filing Program beginning tax year 2021, Michigan requires the state copy be filed directly with Treasury.

For detailed filing options and instructions, refer to Treasury's Income Record Form Remittance Guide. Business taxpayers, issuers, and service providers are encouraged to send state copies of W-2s and 1099s to Treasury electronically whenever possible.

It depends. Issuers with 250 or more income record forms must use Michigan Treasury Online (MTO) to send a magnetic media formatted file electronically. Issuers with fewer than 250 income record forms, may utilize any filing option listed in Treasury's Income Record Form Remittance Guide.

Yes, Michigan participates with the CF/SF Program. This means that the Internal Revenue Service (IRS) shares certain income record form information, automatically satisfying a taxpayer's filing requirement with Treasury. The exception to this general rule is Form 1099-NEC. While Form 1099-NEC is included in the CF/SF Program beginning tax year 2021, Michigan requires the state copy be filed directly with Treasury.

In order for a taxpayer or their service provider to take advantage of this program, they must apply with the IRS and remit eligible income record forms electronically through the Filing Information Returns Electronically (FIRE) System.

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