Nilo Mitra wrote:
- quote -

Thank you. Phil Marti's answer is the way to handle it as
Box 5 tells the IRS that the amount in Box 1 was a return of
capital. That is why Box 2a is a zero. You can disregard
the Code 1 in Box 7.

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A.G. Kalman wrote:

- quote -

My employer allows me to contribute on both a pre-tax basis
as well as an after-tax basis. It was my after-tax
contribution that I withdrew. To be precise, I received 1)
the purely after-tax contributions as a tax-free withdrawal
and 2) the ***earnings*** on this after-tax contribution,
which was rolled over into an IRA.

I hope this helps,
Thanks,
Nilo Mitra

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Phil Marti wrote:
- quote -

Many thanks, Phil, for taking the time to respond. Please
see inlined below some further clarifications and questions.

Kind regards, and many thanks again for taking the time to
respond.

I apologise. I should have been more precise and provided
all the details. The two 1099-R's have the following
entries:

1. The 1099-R for the ***earnings*** portion of the
after-tax contribution which was rolled over into an IRA:

- line 1: the rollover amount
- line 2a: 0.00
- line 2b: blank
- line 3 thru 6: 0.00
- line 7: "G" (indicating "distribution-rollover")
- rest blank

2. The 1099-R for the purely after-tax portion of my
after-tax contribution which was sent to me as a check:

- line 1: my purely after-tax contribution
- line 2a: 0.00
- line 2b: blank
- line 3 thru 4: 0.00
- line 5: same amount as line 1
- line 7: "1" (indicating "distribution - no known exception")
- rest blank

So, the after-tax contribution 1099-R is correct regarding
line 1 = line 5, but I am a bit concerned with line 7 marked
"1". I understand from reading various documents that this
is used by mutual fund companies when taking no position on
what this distribution means. Should this be corrected?

Also, is the fact that the second 1099-R has line 1 = line 5
sufficient to indicate to the IRS that this was a
non-taxable withdrawal?

- quote -

My Taxcut 2005 program is indeed doing this. It adds up
lines 1 from ***BOTH*** 1099-Rs and places it in line 16 of
the 1040. Line 16b is zero and writes "rollover" on the
dotted line.

What worries me is that the real "rollover" amount is only
line 1 from the first 1099-R. Surely the second 1099-R line
1 amount is NOT a rollover, because it represents my
after-tax, previously taxed and withdrawn tax free and
without penalty.

I seem to be unable to get the amount in line 16 to only be
line 1 from the first 1099-R. Shouldn't line 5 from the
second 1099-R be included as a subtraction in the
computation somehow so that line 16 is only line 1 from the
first 1099-R, the "real" rollover?

Is this correct behavior, or am I misunderstanding the
meaning of the term "rollover".

I should also mention that I received a Form 5498 from my
mutual fund company holding my IRA that correctly identifies
the line 1 amount from the first 1099-R as a rolover
contribution to a 2005 IRA.

Please advise.

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A.G. Kalman wrote:

- quote -

My employer allows me to contribute on both a pre-tax basis
as well as an after-tax basis to the 401(k) plan. It was my
after-tax contribution that I withdrew.

To be precise, I received 1) the purely after-tax
contributions as a tax-free withdrawal and 2) the
***earnings*** on this after-tax contribution, which was
rolled over into an IRA.

I hope this helps,
Thanks,
Nilo Mitra

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

mitra.nilo[at]gmail.com wrote:

- quote -

Try page 25 "Rollover of nontaxable amounts" of Pub 575,
"Pension and Annuity Income". I think you should have
rolled over the after-tax contributions to an IRA first,
before taking the distribution, especially if you have no
previous IRA contributions. This would give you an IRA in
which you have a 100% basis.

Penalty-exception rules differ between IRAs and
employer-sponsored qualified plans. Is the "IRA" box
checked for the second 1099-R, the one with code "1"?

-Mark Bole

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mitra.nilo[at]gmail.com wrote:

- quote -

I am confused by this post. If you are still working for the
employer in which you have made contributions to a 401K, the
only way to remove funds from the 401K is via a loan if the
plan allows for it; a hardship distribution if the plan
allows for it; or you become disabled. Other than that,
distributions are not allowed from an active plan unless you
retire or separate from employment or reach the beginning
date for mandatory distributions and you elect to begin
taking distributions.

Please explain how you were able to remove funds from your
401K if you are still employed.

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<mitra.nilo[at]gmail.com> wrote:

- quote -

The second one should have had an entry in box 5 equal to
the entry in box 1. The error indicates that Fidelity may
have misprocessed the transaction and not indicated in their
own records that you were withdrawing after-tax
contributions. I'd give them a call.

- quote -

Report on line 16 of the 1040. 16a is the sum of the box 1
amounts and 16b is zero. Write "rollover" on the dotted
line. (See the instructions for line 16.)

--
Phil Marti
Clarksburg, MD

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Please could someone help me.

I have a 401K with my employer hosted by Fidelity. I
contribute on both a pre-tax and an after-tax basis.
Recently, I needed some money and decided to withdraw my
after -tax contributions. The Fidelity rep told me that I
would pay no tax penalty or income tax on my own
conributions but that I should rollover the ***earnings***
on this after-tax contibution to an IRA. I have done so. The
earnings on my after-tax conributions are now rolled over
into an IRA, and I have received a check for my own
contributions.

However, I received two 1099-Rs from Fidelity, one for the
rollover amount - with distrbution code "G" meaning
"distribution rollover"- and another for my after tax
contribution, with distribution code "1" meaning
"distribution - no exception".

How do I indicate to the IRS that this is an after-tax
contribution distribution, on which I owe no penalties or
taxes.

Please advise in some detail, as I am not able to find my
exact sitution described in IRS Pub 575 or 590.

Many thanks in advance.

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