Page 86 - 2020 Publication 17

14:38 - 19-Jan-2021
Page 84 of 138
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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
rollover in 2021, attach a statement explaining nuity plan; tax-sheltered annuity (section If you must include any amount in your gross
what you did. 403(b)) plan; or governmental deferred com- income, you may have to increase your with-
pensation (section 457) plan to an IRA set up to holding or make estimated tax payments. See
Rollover From Employer's Plan receive the distribution on your behalf can be chapter 4.
Into an IRA treated as an eligible rollover distribution if you Recharacterizations
are the designated beneficiary of the plan and
You can roll over into a traditional IRA all or part not the employee's spouse. The IRA is treated
of an eligible rollover distribution you receive as an inherited IRA. For more information about You may be able to treat a contribution made to
from your (or your deceased spouse's): inherited IRAs, see Inherited IRAs, earlier. one type of IRA as having been made to a dif-
• Employer's qualified pension, profit-shar- Reporting rollovers from employer plans. ferent type of IRA. This is called recharacteriz-
ing the contribution. See Can You Move Retire-
ing, or stock bonus plan; Enter the total distribution (before income tax or ment Plan Assets? in chapter 1 of Pub. 590-A
• Annuity plan; other deductions were withheld) on Form 1040 for more detailed information.
or 1040-SR, line 4a. This amount should be
• Tax-sheltered annuity plan (section 403(b) shown in box 1 of Form 1099-R. From this How to recharacterize a contribution. To re-
plan); or amount, subtract any contributions (usually characterize a contribution, you must generally
• Governmental deferred compensation plan shown in box 5 of Form 1099-R) that were taxa- have the contribution transferred from the first
(section 457 plan). ble to you when made. From that result, sub- IRA (the one to which it was made) to the sec-
A qualified plan is one that meets the re- tract the amount that was rolled over either di- ond IRA in a trustee-to-trustee transfer. If the
rectly or within 60 days of receiving the
transfer is made by the due date (including ex-
quirements of the Internal Revenue Code. distribution. Enter the remaining amount, even if tensions) for your tax return for the year during
Eligible rollover distribution. Generally, an zero, on Form 1040 or 1040-SR, line 4b. Also, which the contribution was made, you can elect
eligible rollover distribution is any distribution of enter "Rollover" next to Form 1040 or 1040-SR, to treat the contribution as having been origi-
all or part of the balance to your credit in a quali- line 4b. nally made to the second IRA instead of to the
fied retirement plan except the following. first IRA. If you recharacterize your contribution,
1. A required minimum distribution (ex- Transfers Incident to Divorce you must do all three of the following.
plained later under When Must You With- If an interest in a traditional IRA is transferred • Include in the transfer any net income allo-
draw IRA Assets? (Required Minimum from your spouse or former spouse to you by a cable to the contribution. If there was a
Distributions)). divorce or separate maintenance decree or a loss, the net income you must transfer may
2. A hardship distribution. written document related to such a decree, the be a negative amount.
3. Any of a series of substantially equal peri- interest in the IRA, starting from the date of the • Report the recharacterization on your tax
return for the year during which the contri-
odic distributions paid at least once a year transfer, is treated as your IRA. The transfer is bution was made.
tax free. For detailed information, see Distribu-
over: tions under divorce or similar proceedings (al-
a. Your lifetime or life expectancy, ternate payees) under Rollover From Employ- • Treat the contribution as having been
made to the second IRA on the date that it
b. The lifetimes or life expectancies of er's Plan Into an IRA in Pub. 590-A. was actually made to the first IRA.
you and your beneficiary, or No recharacterizations of conversions
c. A period of 10 years or more. Converting From Any Traditional made in 2018 or later. A conversion of a tradi-
IRA to a Roth IRA
4. Corrective distributions of excess contri- tional IRA to a Roth IRA, and a rollover from any
other eligible retirement plan to a Roth IRA,
butions or excess deferrals, and any in- Allowable conversions. You can withdraw all made in tax years beginning after tax year
come allocable to the excess, or of excess or part of the assets from a traditional IRA and 2017, can’t be recharacterized as having been
annual additions and any allocable gains. reinvest them (within 60 days) in a Roth IRA. made to a traditional IRA. If you made a conver-
5. A loan treated as a distribution because it The amount that you withdraw and timely con- sion in the 2017 tax year, you had until the due
tribute (convert) to the Roth IRA is called a con-
doesn't satisfy certain requirements either version contribution. If properly (and timely) rol- date (with extensions) for filing the return for
when made or later (such as upon de- led over, the 10% additional tax on early that tax year to recharacterize it.
fault), unless the participant's accrued distributions won't apply. However, a part or all
benefits are reduced (offset) to repay the of the conversion contribution from your tradi- No deduction allowed. You can't deduct the
contribution to the first IRA. Any net income you
loan. For more information, see Plan loan tional IRA is included in your gross income.
offsets under Time Limit for Making a Roll- transfer with the recharacterized contribution is
treated as earned in the second IRA.
over Contribution in Pub. 590-A. Required distributions. You can't convert
6. Dividends on employer securities. amounts that must be distributed from your tra- How do you recharacterize a contribution?
ditional IRA for a particular year (including the
To recharacterize a contribution, you must no-
7. The cost of life insurance coverage. calendar year in which you reach age 72 under tify both the trustee of the first IRA (the one to
the required minimum distribution rules (dis- which the contribution was actually made) and
Your rollover into a traditional IRA may in- cussed later)).
clude both amounts that would be taxable and the trustee of the second IRA (the one to which
the contribution is being moved) that you have
amounts that wouldn’t be taxable if they were Income. You must include in your gross in- elected to treat the contribution as having been
distributed to you, but not rolled over. To the ex- come distributions from a traditional IRA that made to the second IRA rather than the first.
tent the distribution is rolled over into a tradi- you would have had to include in income if you You must make the notifications by the date of
tional IRA, it isn’t includible in your income. hadn't converted them into a Roth IRA. These the transfer. Only one notification is required if
amounts are normally included in income on
Any nontaxable amounts that you roll your return for the year that you converted them both IRAs are maintained by the same trustee.
TIP over into your traditional IRA become from a traditional IRA to a Roth IRA. The notification(s) must include all of the follow-
part of your basis (cost) in your IRAs. You don't include in gross income any part ing information.
To recover your basis when you take distribu- of a distribution from a traditional IRA that is a • The type and amount of the contribution to
tions from your IRA, you must complete Form return of your basis, as discussed later. the first IRA that is to be recharacterized.
8606 for the year of the distribution. See Form You must file Form 8606 to report 2020 con-
8606 under Distributions Fully or Partly Taxa- versions from traditional, SEP, or SIMPLE IRAs • The date on which the contribution was
ble, later. to a Roth IRA in 2020 (unless you recharacter- made to the first IRA and the year for which
it was made.
Rollover by nonspouse beneficiary. A direct ized the entire amount) and to figure the amount • A direction to the trustee of the first IRA to
to include in income.
transfer from a deceased employee's qualified transfer in a trustee-to-trustee transfer the
pension, profit-sharing, or stock bonus plan; an-
Page 82 Chapter 9 Individual Retirement Arrangements (IRAs)