Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
1099-R with code 1P
Posted by: have1, April 9, 2010 05:35PM
I have a 2009 1099-R with distribution code 1P for an excess contribution made in 2008 in my Simple IRA with a gross amount of $440 and a taxable amount of 0. Do I need to file this information with my 2009 taxes & will I have to pay a 10% penalty on the same? What should show up on my Form 1040 on lines 15a and 15b and 58.
Or
Do I only have to amend my 2008 return? When amending my 2008 return, should I simply reduce the contribution made by $440 or do I leave the contribution amount the same and instead enter the 1099-R information? Should I expect lines 15and and 15b and 58 to reflect the 1099-R numbers?

Re: 1099-R with code 1P
Posted by: Alan S., April 10, 2010 12:30AM
Since you received the corrected distribution on a timely basis, just file an amended 2008 1040X and include the original amount (more than $440) of your excess deferral in your income. There should be no early distribution penalty since there is no earnings allocated to the corrective distribution. Therefore you should not need a 5329 or a line 58 entry. Also no line 15a or 15b entry.

But the IRS could bill interest on the late payment of the tax due on the amended return for 2008.

Re: 1099-R with code 1P
Posted by: have1, April 10, 2010 01:36AM
Thanks Alan. This was helpful. But, actually, the original excess amount was $343 in 2008 but I received a gross distribution of $440 in 2009. Do you still think I do not owe any penalties on this? ...Also, what do you think is the correct way to amend the 2008 return?

Re: 1099-R with code 1P
Posted by: Alan S., April 10, 2010 01:53AM
If the original excess was less than 440, then 2a should show the taxable amount of earnings. Since it showed -0-, I assumed there was a loss. So I guess now you need to find out why they put -0- in 2a. The IRA custodian did the earnings calculation, right?

Re: 1099-R with code 1P
Posted by: have1, April 10, 2010 02:25AM
So, the taxable amount in my amended 2008 would be 440-343, correct?
I am not sure why the IRA custodian put in 2a...I guess they are not obligated to calculate that.

Re: 1099-R with code 1P
Posted by: Alan S., April 10, 2010 03:49AM
Hate to say it, but this is looking like an incorrect 1099R, and/or a discrepancy between what it saying and what you indicate happened. An excess deferral to a SIMPLE IRA is not handled like an excess contribution made to a traditional IRA or Roth IRA. Starting to look like the SIMPLE custodian is treating this like a TIRA, and that is not correct.

The deferral limit for 2008 was 10,500 unless you had reached age 50. Did you have 10,843 deferred? Was the payment made to you before or after 4/15/2009? And are you sure this was the only 1099R you received?

Further, the gain on this excess deferral is being calculated at 28%. From 2008 to early 2009, the market crashed. Seems unlikely that your account gained 28% in that time period.

Please advise info.

Re: 1099-R with code 1P
Posted by: have1, April 10, 2010 11:01AM
Since I am self-employed, I contributed $900 more as part of the 3% employer contribution for a total of $11,400 (10500+900). My calculation here went wrong and I should have contributed only $557 (900-343) as employer contribution.

I received 3 1099-R's whose total adds up to $343.

I made this employer contribution around Dec 11 2008 mentioning the excess of $343 and received the distribution of $440 in October 2009 - so the gain makes sense.

I hope this helps. I am beginning to think I should have included the gain as part of my 2009 income which I already filed. I hope I don't have to amend 2 returns now.

Thanks for all your help.

Re: 1099-R with code 1P
Posted by: Alan S., April 11, 2010 01:13AM
This one is not your typical corrective situation, and the instructions are not much help either.

I suppose those 3 1099R forms have different codes in Box 7?

Re: 1099-R with code 1P
Posted by: have1, April 11, 2010 12:31PM
They all have distribution code 1P. The 3 forms are for 3 different mutual funds that made the distributions totaling 440. The forms are identical in all respects except for the gross amount and fund names.

I think, I am going to amend my 2008 return to reduce my Simple IRA contribution made by 343 (which will increase my income), put 440 in 15a, put 97 (440-343) in 15b and 65 (10% x 440+ 6% x 343) on line 58 as the penalty. Since my ordinary tax rate was higher in 2008 than in 2009, I think I am paying the maximum amount of taxes that could be due.

do you think this is ok?
Thanks

Re: 1099-R with code 1P
Posted by: Alan S., April 12, 2010 07:16PM
There are several unresolved issues in reporting SIMPLE IRA excess contributions so it is best to report in accord with those 3 1099R forms, even though there may be questions whether they are correct or not.

I agree that you should amend your 2008 return to report the added $343 income, since you did deduct that amount then and the "P" refers to year 2008.

If you received the corrective distribution by 10/15/2009, your extended due date, then the correction was done on time according to IRA rules. Therefore, I would show the 440 on 15a and 97 on 15b as you suggested (also on 2008 amended return). 10% early distribution penalty applies to the earnings ($10). But since you received the corretive distribution on time, there is NO 6% excise tax due.

The net result is that you would pay the 2008 rate on $440 in added income plus only a penalty of $10.

And none of this will affect your 2009 return.

Re: 1099-R with code 1P
Posted by: have1, April 13, 2010 01:30AM
I did receive the corrective distribution on Oct 4 2009, so I will follow your suggestion.
Thanks for all your help.



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