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View Full Version : Do I have to pay taxes on a traditional IRA rollover to a Bank IRS CD?


bootn
Jan 31, 2010, 12:51 PM
In 2009 I rolled over my traditional IRA to Bank CD IRA. I received a 1099 from the Financial Services that I had the IRA in, and it says it was a normal distribution. Am I going to have to pay taxes on this?

MukatA
Jan 31, 2010, 11:09 PM
It should be eligible roll over distribution and you do not pay tax on distribution.

ebaines
Feb 1, 2010, 07:45 AM
Since they sent a 1099-R, and it indicated a "normal" distribution the IRS will interpret this to mean that this is a taxable distribution, and also potentially subject to the 10% early withdrawal penalty, if you are under age 59-1/2. So some questions for you:

1. Did you roll the entire amount of the old IRA to the new IRA account?
2. If they withheld any tax in the distribution, did you make up for that amount in your new IRA? A common mistake people make is to establish the new account with only the amount of the check they received from the old account - which turns the withheld amount into an actual distribution, which is taxable and subject to early withdrawal penalty.
3. Did you establish the new IRA within 60 days of the distribution from the old? If you procrastinated on this the distribution could be considered as taxable.

If the answer to all three questions is "yes," the rollover is not taxable. To indicate this to the IRS on your 1040 form, show the distribution on line 15a, put $0 on line 15b, and write "ROLLOVER" next to 15b. For future reference - these complications are why it is always recommended that you do a direct rollover from one institution to another and NOT take the check.

** EDIT **
Just reallzed the OP said this was a "normal distriibution." By that I now assume he means that distribution code 7 is shown on the 1099-R - and not distribution code 1as I had originally assumed - so that the distribution is not subject to the 10% early withdrawal penalty. However, it IS subject to income taxes as described, for any portion not properly rolled over within the 60-day window.