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taxingtaxes · Apr 14, 2009, 06:41 AM

Hello,

I have an IRA and GRA account with TIAACRREF. In 2008, I took out $5500 from my IRA (for which I have to pay a 10% early withdrawal penalty) and I also got an "internal" loan from my TIAA Cref GRA (Group Retirement Account) for $7000 (Distrubution code "G"). I was told that I do not have to pay a penalty for early withdrawal on this $7000 because it is a loan. However, do I have to report this $7000 as income? Is my income for 2008 $5500 or $12500? (My only income for 2008 was whatever I withdrew from my retirement account with TIAA Cref.)

FYI, I received two 1099R, one for $5500 with distribution code "1" and one for $7000 with distribution code "G". For the loan, I also received form 5498 "IRA contribution information". On that form everything is "0' except box 2 "Rollover contributions" is "$7000". Can I claim this as a "Retirement savings contribution credit" (line 51) and fill out form 8880? (Im thinking no, because it says on the form 8880 that "Rollover contributions" can't be included. Is my understanding correct?)

Thanks in advance for any help!!

Tina

ebaines · Apr 14, 2009, 08:41 AM

A loan is not income. So no - you do not include the l$7K loan as income on your taxes. I trust that TIAA-CREF did not withhold any taxes on the $7K, is that right? Whereas they definitely should have on your $5.5K withdrawal.

I am a little surprised that you received a 1099-R for the loan, with code G. Code G means that the custodian (TIAA-CREF) believes the money was rolled over to another qualified plan - such as an IRA account. I suggest you call them to find out why that is. But in any event, it does not need to be reported on your taxes.

You cannot claim a rollover (or a loan for that matter) as a retirement contribution on Form 8880. So no - do not try to take that credit.

taxingtaxes · Apr 14, 2009, 09:40 AM

Thanks again ebaines. I will call them and find out. But, no, they did not withhold taxes on the $5500 that is why I have to pay it now.

One more thing: There are two boxes on the 1040 "IRA Distributions" and the other "Taxable Amount". What is the first box for? Should I put $12500 in the first, and $5500 in the second?

Also, I am wondering... the loan isn't considered a pension or annuity, yes?

ebaines · Apr 14, 2009, 10:04 AM

You report the $5,500 withdrawal from the IRA in line 15b, leaving 15a blank. Then report the $7000 on line 16 in box 16a, with $0 in box 16b, and write "rollover" on the line next to box 16b. See pages 23-26 of the instructions for form 1040 for details:
http://www.irs.gov/pub/irs-pdf/i1040.pdf

But before proceeding please clarify something - regarding the 1099-R you received for that $7K loan, what does it report in boxes 2a and 2b?

taxingtaxes · Apr 14, 2009, 10:25 AM

Originally Posted by ebaines

You report the $5,500 withdrawal from the IRA in line 15b, leaving 15a blank. Then report the $7000 on line 16 in box 16a, with $0 in box 16b, and write "rollover" on the line next to box 16b. See pages 23-26 of the instructions for form 1040 for details:
http://www.irs.gov/pub/irs-pdf/i1040.pdf

Ah, OK, now things are clearer! Thank you :)

But before proceeding please clarify something - regarding the 1099-R you received for that $7K loan, what does it report in boxes 2a and 2b?

2a Taxable amount "0"
2B "Not determined"

Is that a problem?

I asked this question in a separate thread but here it is: I am filing form 201 for NYS and line 9 asks about "taxable amount of IRA distribution" but it's unclear to me where I would put the 10% penalty. (Since my income is less than the standard deduction my tax is 0). How can I make sure to pay the penalty?

ebaines · Apr 14, 2009, 10:52 AM

The 10% penalty only applies to your federal taxes - you report it on line 59 of your 1040. As for NY State, you report the $5500 distribution as income, but there is no additional penalty imposed by the state.

I am still confused as to why TIAA-CREF issued this 1099-R at all. Are you currently paying the loan back, through some sort of monthly payments to TIAA-CREF? I am also surprised that this is a loan, given that you are no longer employed. Normally only actively employed people can borrow from their retirement plan - and if you had a loan outstanding at the time you left employment it would automaticaly be converted from a loan to a distribution. That's the way it works for 401(k) plans, and so I just want to make sure this hasn't happened in this case. I'd be interested to hear what TIAA-CREF says in response to your inquiry.

taxingtaxes · Apr 14, 2009, 12:45 PM

Yes I am paying back the loan with interest on a monthly basis. I took out this loan after employment was terminated. My former employer is an educational institution and apparently you can take out a loan after employment. TIAACREF said that it is not always like this, depends on the terms your former employer stipulates and type of account they have with TIAACREF. Does that clarify it? Or is this something I need to worry about?

BTW, you said that I should put the $7000 on line 16a of Form 1040. So is this loan considered an "Annuity"?

ebaines · Apr 14, 2009, 01:03 PM

Originally Posted by taxingtaxes

BTW, you said that I should put the $7000 on line 16a of Form 1040. So is this loan considered an "Annuity"?

I am making a bit of an assumption - that you would report a distriubution from your Group Retirement Account just like you would from a 401(k) or a 403(b). These get reported on line 16, not 15, even though they are neither a pension nor an annuity.

It's still not clear to me why TIAA-CREF reported this as a rollover, because it's not. Hav ethey explained that to you?

taxingtaxes · Apr 14, 2009, 01:36 PM

Originally Posted by ebaines

I am making a bit of an assumption - that you would report a distriubution from your Group Retirement Account just like you would from a 401(k) or a 403(b). These get reported on line 16, not 15, even though they are neither a pension nor an annuity.

My head is starting to ache...
Ok, question, since it does not have to be reported as income, do I even have to put the loan on the tax return?

It's still not clear to me why TIAA-CREF reported this as a rollover, because it's not. Hav ethey explained that to you?

Hmm,I don't understand. You have me worried now. If it is not a roll over, what is it? I thought it was a loan but you're confusing me... Can you explain what the problem you think is?

taxingtaxes · Apr 14, 2009, 01:56 PM

Originally Posted by ebaines

I am making a bit of an assumption - that you would report a distriubution from your Group Retirement Account just like you would from a 401(k) or a 403(b). These get reported on line 16, not 15, even though they are neither a pension nor an annuity.

It's still not clear to me why TIAA-CREF reported this as a rollover, because it's not. Hav ethey explained that to you?

OK! I have an answer for you!!

So, the $7000 isn't my loan! Apparently I rolled over from my GRA into the IRA $7000, but I only took out $5500.

As you can tell, I am not a finance genius.

Anyway, now what do I put on the 1040 Form line 15? Do I put in 15a "$7000" and in 15b $5500? OR should I just leave 15a blank? I am pretty sure I don't have to put in anything on line 16.

ebaines · Apr 14, 2009, 02:11 PM

Now I'm confused.

Do you have a loan outstanding from your retirement account, or not?

Did you roll $7K from your retirement account to an IRA, and then take a $5500 distribution from the IRA?

It would help if we started back at the beginning of 2008 , and you give a history of each distribution, loan, rollover, whatever.

taxingtaxes · Apr 14, 2009, 02:26 PM

Why are you confused? You shouldn't be confused... you were right. They don't send an 1099 for a loan. The two 1099 that I got are for the same money. First I rolled over $7000 to an IRA (which is the 1099 with code G). Then I took out from this same IRA $5500 (that 1099 has code 1). In addition, I took out an internal loan, for about $7k, which I am paying back monthly with interest (and they didn't send me any 1099 for that).

So the confusion stems from me thinking that the 1099 with code G was for that internal loan when it was in fact simply the rollover I did before taking out the distribution. I confused myself because the amount for the loan and the rollover were almost similar and I am just an when it comes to money.

Anyway, can you please answer my question about what to put in those boxes on line 15? My guess is I should just leave 15a blank, and put $5500 in 15b..

ebaines · Apr 14, 2009, 02:31 PM

OK, I get it now.

You report just as I said before, in post #4: you put $5500 in 15b, $7000 in 16a, $0 in 16b, and write "rollover" next to 16b. Seems we've come full circle.

taxingtaxes · Apr 14, 2009, 02:41 PM

Almost... :)

Do I have to report the $7000 rollover? It's not a pension nor an annuity, so why do I have to report it on line 16? Can't I just leave 16 blank and just report the $5500 on line 15b?

ebaines · Apr 14, 2009, 02:46 PM

Given that the instructions I referenced earlier say to do it this way, I suggest you do it as the IRS says. Line 16 is for reporting distributions from retirement accounts, which I believe your TIAA-CREF account was. At the end of the day it doesn't matter, because the taxable part of the rollover is $0. By reporting it this way it is clear to the IRS that you aren't hiding it.

taxingtaxes · Apr 14, 2009, 02:51 PM

Makes super sense now!! THANK YOU SO MUCH, ebaines!

Tina

taxingtaxes · Apr 14, 2009, 02:56 PM

Do you happen to know why they don't want you to attach a copy of 1099 to your tax return unless Box 4 shows that federal income tax was withheld? Don't they need a copy of this?

ebaines · Apr 14, 2009, 03:00 PM

The company sends a copy of the 1099 to the IRS. So the IRS doesn't need a copy from you.