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Message
Got a bill in from the IRS for $18,000 for improper rollover of 401K...
Posted on 5/10/13 at 12:48 pm
Posted on 5/10/13 at 12:48 pm
In early 2011, I rolled over my former employers retirement plan to my new company's plan. There was an issue of how the checks from the old plan were written to me and no 5498 form was given (listed the money as taxable). I think maybe because it was a SIMPLE plan?
I was informed by the agent of the new company that all I had to do was rollover the same money into the new plan within 30 days (or maybe 60?) and that it wouldn't be a problem. I rolled it into my new plan within a week.
Years have gone by and I now get this ridiculous bill (roughly $14K error on taxes, $3K tax penalty, and the rest interest). I am given the opportunity to pay it or contest it, which obviously I will contest it. I need to write a letter explaining the rollover, but should I get in touch with an attorney or tax adviser prior to writting the letter? I'm definitely going see my human resources department to see what they can do to help, but I'm wondering if anyone else has gone through this that could give me some advise.
I was informed by the agent of the new company that all I had to do was rollover the same money into the new plan within 30 days (or maybe 60?) and that it wouldn't be a problem. I rolled it into my new plan within a week.
Years have gone by and I now get this ridiculous bill (roughly $14K error on taxes, $3K tax penalty, and the rest interest). I am given the opportunity to pay it or contest it, which obviously I will contest it. I need to write a letter explaining the rollover, but should I get in touch with an attorney or tax adviser prior to writting the letter? I'm definitely going see my human resources department to see what they can do to help, but I'm wondering if anyone else has gone through this that could give me some advise.
This post was edited on 5/10/13 at 1:03 pm
3
Posted on 5/10/13 at 1:19 pm to TIGERSby10
I'd start with writing a letter and any documentation you may have. If that fails go see a tax attorney.
Posted on 5/10/13 at 1:23 pm to TIGERSby10
You should get a copy of the statement from the company retirement account going out and a statement from the account where it went in. You should be good to go. Those numbers will match.
Posted on 5/10/13 at 1:43 pm to Broke
If TigerDroppings had an upvote button, I'd upvote Broke's post.
For future reference you should literally write that you had a 60-day rollover on your 1040.
For future reference you should literally write that you had a 60-day rollover on your 1040.
Posted on 5/10/13 at 1:44 pm to Broke
If TigerDroppings had an upvote button, I'd upvote Broke's post.
For future reference you should literally write that you had a 60-day rollover on your 1040.
For future reference you should literally write that you had a 60-day rollover on your 1040.
Posted on 5/10/13 at 1:50 pm to slackster
Thanks. I know he's worried. I got a $40,000 bill once.
Posted on 5/10/13 at 2:20 pm to slackster
quote:
If TigerDroppings had an upvote button, I'd upvote Broke's post.
Look at the little green and red arrows, added yesterday...
Posted on 5/10/13 at 2:41 pm to wickowick
I got a letter yesterday as well, saying I owed $1427 from my 2011 return. Same sort of deal. Had gotten one back from 2010 too and once my CPA got it and redid the numbers, the IRS actually had to pay me $300. I just and the letter over to my CPA and let her handle it. That what I pay her for.
Posted on 5/10/13 at 3:41 pm to Broke
As far as getting a statement from the company I left, they are out of business. I would imagine the more important part would be a letter from the company I am currently with who actually invested the rollover money into my current retirement plan.
I'm just worried that if I don't document something properly or leave something out, they will reject the whole thing and the case will be closed. I know I'm probably just paranoid, but I definitely don't want to spend $18 K if it is their mistake in the first place.
I'm just worried that if I don't document something properly or leave something out, they will reject the whole thing and the case will be closed. I know I'm probably just paranoid, but I definitely don't want to spend $18 K if it is their mistake in the first place.
Posted on 5/10/13 at 4:09 pm to TIGERSby10
quote:
As far as getting a statement from the company I left, they are out of business.
Do what? Who?
Posted on 5/10/13 at 8:08 pm to Broke
I think you will be ok after re-reading this.
This post was edited on 5/10/13 at 8:24 pm
Posted on 5/10/13 at 8:25 pm to TIGERSby10
quote:
know I'm probably just paranoid, but I definitely don't want to spend $18 K if it is their mistake in the first place.
Trust me, It's not paranoia. Get the documents you can from your current employer, and take this issue to your CPA immediately. Don't talk to the IRS collections department, you'd be dealing with the lowest form of life on Earth and they will likely trick you into completing a 433-c which will allow them to place a lien on you. SERIOUS AS A frickING HEART ATTACK. CPA IMMEDIATELY.
Posted on 5/11/13 at 7:48 am to TIGERSby10
Your initial employer should have given you a 1099-R for this distribution which you should have filed with your 2011 return. This 1099-R would have had a code letter or number on it to indicate whether the distribution was taxable or not. Whenever you actively receive retirement distributions instead of doing a trustee to trustee transfer, you can encounter tax problems. Did your initial employer withhold 20% for taxes when they issued you the check? Generally, they do. Then you recover that money when you file your return. But in the meantime, you have to come up with that 20% from other resources in order to be able to roll over the entire 100% of the distribution to a different qualified retirement savings account within the 60 day window. Trustee to trustee transfer avoids all this hassle.
Edited to add: The IRS has a copy of this 1099-R. That's how they caught this. Go to your CPA or any QUALIFIED and EXPERIENCED tax professional with the necessary documents and your initial tax return and they will file an amended return. This should take care of it for you.
Edited to add: The IRS has a copy of this 1099-R. That's how they caught this. Go to your CPA or any QUALIFIED and EXPERIENCED tax professional with the necessary documents and your initial tax return and they will file an amended return. This should take care of it for you.
This post was edited on 5/11/13 at 7:54 am
Posted on 5/11/13 at 8:15 am to BFIV
I did get a 1099-R from my old employer and the money was listed as taxable, but no money was withheld. The checks were issued to me without also listing the new company's retirement account on them. I just assumed since the money was rolled over and no money actually was paid to me, I could just file my taxes as it was a rollover.
I do have the paperwork showing the check(s) amount of the rollover and the deposit into the new account for the exact same amount a week later. From what I am hearing, I think I will first get a statement from the representative of my new company of how I did rollover the check(s) directly into my new company's account and then take all of my info to a CPA to before writing my response to the IRS.
I was just hoping someone would have went through this so I would know if I only get one shot at the response or if this is more of an open case that gets worked out until it is corrected.
I want to thank everyone who responded with advice as now I am a little less paranoid that this will get worked out if I take the proper steps to fix it.
I do have the paperwork showing the check(s) amount of the rollover and the deposit into the new account for the exact same amount a week later. From what I am hearing, I think I will first get a statement from the representative of my new company of how I did rollover the check(s) directly into my new company's account and then take all of my info to a CPA to before writing my response to the IRS.
I was just hoping someone would have went through this so I would know if I only get one shot at the response or if this is more of an open case that gets worked out until it is corrected.
I want to thank everyone who responded with advice as now I am a little less paranoid that this will get worked out if I take the proper steps to fix it.
Posted on 5/11/13 at 8:20 am to TIGERSby10
quote:
I want to thank everyone who responded with advice as now I am a little less paranoid that this will get worked out if I take the proper steps to fix it.
You'll be ok after you file the amended return. You can get transcripts of the 1099-R from the IRS, if you need it. Your CPA will take care of this for you. Just don't ignore it. (Which I'm sure you won't!)
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