There are many reasons you could have received a notice regarding your Form(s) 1099-R. The most common reasons are listed below:
- The form was never entered into the TaxAct® program and the income was not reported elsewhere on the return.
- Entry error:
- Example of a transposed number: The number that should have been entered was $21,123, instead the user entered $12,123. This would have caused a difference of $9,000 in underreported taxable income.
- Example of an omitted number: The number that should have been entered was $21,123, instead the user entered $2,123. This would have caused a difference of $19,000 in underreported taxable income.
- The form imported from a previous year’s tax return, but only the payer’s information was transferred. The user did not enter the information for the current tax year.
- The form was entered into the TaxAct return, but the user did not indicate either of the following: (1) Taxable Amount in Box 2a, or (2) check the box Taxable Amount Not Determined in Box 2b. If neither of these were entered, the TaxAct program would have assumed the taxable amount was $0.00. You would have seen a Red Alert regarding the omission of entries.
- The form was entered into the TaxAct return, but the user indicated the retirement distribution was rolled over.
- If you did not roll over a retirement plan distribution, then the IRS notice may be correct in assessing additional tax.
- If you did in fact roll over an amount the IRS is questioning, you will need to provide them with a copy of the Form 5498 or similar statement received from the plan administrator or financial institution showing the rollover.
- The form was entered into the TaxAct return, but the wrong distribution code was selected in Box 7.
- For example, the user entered Code 2-Early Distribution, Exception Applies; however, the actual code shown on the form was Code 1-Early Distribution, No Known Exception. By selecting Code 2 instead of Code 1, this would have prevented the TaxAct program from correctly populating Form 5329-Additional Taxes on Qualified Retirement Plans. In this instance, the IRS notice may be adjusting your return to now include the 10% penalty tax on early distributions.
To review and/or modify your entries for Form 1099-R Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc:
- From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal
- Click Retirement Plan Income in the Federal Quick Q&A Topics menu to expand the category and then click IRA, 401(k), and Pension Plan Distributions (Form 1099-R)
- Click New Copy of Form 1099-R (Desktop users click Add) to create a new copy of the form or click Review to review a form already created
- Click Quick Entry or Step-by-Step Guidance
- If you select Quick Entry, complete the form to match your paper copy of Form 1099-R and be sure to scroll down to complete all sections.
- If you select Step-by-Step Guidance, the program will proceed with the interview questions for you to enter or review the appropriate information.