Received a form 1099-R in 2023 for an employee stock plan that I cashed in after I retired.

Question

I received a form 1099-B and  a form 1099-R in 2023 for an employee stock plan that I cashed in after I retired. I cashed in for a total amount of 65,000 and had a check made out and sent to me personally. I then deposited 40,000 into a traditional IRA. Do I have to pay income taxes on the full 65,000, or just the 25,000 that was not reinvested?

Thank You

JanaA · Answer

When you receive a tax form, the IRS also receives a copy of the form. If you do not include the form when you file your return, there is a chance the IRS will adjust your return to account for the additional income. In this case, as the rollover was indirect the IRS will tax the full amount.

A rollover from one tax favored account to another is a non-taxable event if correctly reported. Without access to your account, we cannot see how this is being reported. However, if your full distribution was $65,000 and you have a rollover of $40,000 this does leave you with a taxable distribution of $25,000. Depending on your tax withholdings and/or your personal tax rate, you may have a tax amount due. However the total tax amount due depends on many factors.

One of our agents would be happy to take a look at your account and confirm that the rollover is being correctly reported. Please sign in to your account and select the "Support" tab so that we can assess your specific situation.

Jamouski · Answer

This was a tax favored account and on the Distribution Rollover screen on the 1099-R I did indicate that $40,000 was rolled over.  If I don't add the form 1099-B it shows that I owe 0 federal taxes. My question is, do I need to include the form 1099-B? The funds of 65,000 were from a Employee Stock Ownership Plan and Trust, and the 10099-B lists the full amount of 65,000. When I add the form I suddenly owe over $7,000 in Federal taxes and 1,100 in state taxes. Thank you.

JanaA · Answer

You have 60 days from the date you receive an IRA or retirement plan distribution to roll it over to another plan or IRA. This is what is referred to as an indirect rollover. This is generally allowed for the same IRA once during the year.

If the funds are contributed to another tax favored account, this transaction will not be a taxable event. In our software, once you have entered the 1099-R, you will be asked some follow-up questions about this transaction. On the Distribution Rollover screen, you can indicate how much of your distribution was rolled over. This process will report the rollover correctly on your return and will result in a non-taxable event.