I requested direct transfers from 3 different IRAs at 3 different institutions in 2021 to consolidate accounts. One of them totally botched it and sent the check to me. I figured no biggie; the other two places sent the checks directly to the new institution FBO to me so while doing the 60-day rollover thing is lousy, I could live with it. I had never done an indirect IRA-IRA rollover before and didn’t plan on any ever again, so I didn’t try to return the funds to them.

But now one of the two places I thought had done it correctly is claiming that instead of a direct transfer, it was a rollover. They sent me a 1099-R, which the IRS says isn’t needed if the funds do not go to the participant. The 1099-R is coded 7G. Does this mean I am in violation of the 1-per-year rule, or am I safe since the check was sent directly to the gaining institution? My tax people just stared at me in disbelief so I’m a little concerned. If I’m going to owe money I want to pay ASAP before even more penalties are incurred.

Thanks!

Vanguard questioning now if they will code it on the 1099-R the send for 2019 as direct transfer using Letter G in Box 7. This is because they wired the money to Navy Fed. Please advise.

Thanks!

Hi Tracy – Take it to your bank and see if you can cash it (and yes, you’ll then have to pay the tax and penalty). If the bank says no, you’ll have to contact the pension administrator who issued the check and find out what’s going on.

Hi Hana – Not as long as you complete the rollover within 60 days. But if they’ve withheld taxes on the distribution(s) you may not have sufficient money to rollover the entire amount, and that part could be taxable. For example, if the distribution was $10,000 and they withheld $2,000 for taxes, you may have only $8,000 to rollover, unless you supplement the rollover with other funds. Otherwise the $2,000 not rolled over into the new account will be taxable.

Hi Ken – As I interpret the one ira rollover per year rule you’ll be safer if you do a direct trustee-to-trustee rollover of the two IRAs into one. There’s no limit on those. As to making up the exit fees out of pocket, that might be construed as an additional contribution, which may or may not be allowed in your situation. Check with your tax preparer as well as all three trustees to make sure you go about this the right way.

Hi Sam – You’re question is very specific and carries tax complications/implications. For that reason I’m going to refer you to your CPA. Only someone who knows your actual tax situation should address this kind of question. What I will offer is that if you “just take all the money out” you WILL have taxes and probably penalties. That’s why you need to talk to a CPA.