Reason for omitting Gross Distribution Amount (old) Lines 15a/16a

Home Fairmark Forum Retirement Savings and Benefits Reason for omitting Gross Distribution Amount (old) Lines 15a/16a

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  • #2197
    kaneohe
    Participant

    What is the reason for omitting putting in gross distribution amounts for IRAs/pensions if the whole amount is taxable? It seems a bit weird to see net amounts larger than gross.

    #2204
    Alan S.
    Participant

    Kaneohe, I don’t know for sure but will make a guess. Lines 15 and 16 (now line 4) were historically associated with a very high % of fully taxable distributions and IRS tracking only needed the b line for tracking because the a line would be identical. In the last two decades there has been an explosion of portability options, Roth accounts, QCDs, and the like. The instructions have always factored in ALL distributions for a given line, so if ANY distribution on line 16 was partly taxable then all line 16 distributions would be shown on 16a, not just the partly taxable one. So the IRS is saying that they do not need or want the a line filled out if it would be the same as b and not helpful to their matching efforts.

    Now we have a long list of exceptions to the general rule that taxpayers have to wade through if they paper file. If you use a program like free file fillable forms and enter a number on a which is the same as b, the e file will reject. More comprehensive programs will probably handle this and produce a 1040 without an amount on the a line according to the rules.

    While it’s tempting to think these rules stick around because of an antiquated IRS computer matching program, and will go away once the systems are upgraded, I am not so sure. Now that 15 and 16 have been consolidated to line 4, the IRS has lost the advantage of IRA separation in the matching process. I just checked and expected to see an instruction that if EITHER and IRA or pension exception existed, then ALL distributions needed to show on line a, but did not find that. The IRA and pension exceptions are still separate even though they all go on line 4.

    That said, if anyone files a paper return and shows an amount on line a when they shouldn’t, I don’t think it will cause any issues. And if you are using a tax program, it should reflect all those exceptions. So taxpayers don’t need to worry about this as far as I can see, and can let the IRS matching program deal with it.

    #2205
    kaneohe
    Participant

    Thanks, Alan……..was just curious. Seems like entering on a) is more natural and having the total match IRS would give them some confidence that everything was reported…………..a similar things happens for CGs where the 8949 & Sch D have gross amount totals reported even tho the net gain is a totally different number which IRS has no idea what it should be.

    #2342
    kaneohe
    Participant

    Filing MFJ. Both of us have TIRAs w/ basis.QCD taken out of one TIRA acct All pensions are fully taxable. …………so 4a) will not show any pensions? but will show all TIRA distributions? Code QCD only.

    #2350
    Alan S.
    Participant

    In IRS free file fillable forms, I also had a taxable pension and IRA with basis. In past years my first e file was rejected when I entered the pension in 16a and I had to delete that entry, so was curious what would happen this year with the combined line 4. So I filed with 4a showing the pension and the IRA gross distribution and that was accepted.

    The 1040 Inst for line 4 include a paragraph for “more than one distribution” but it is printed in the IRA distribution section. I think they need to state at the very beginning of the line 4 instructions that this provisions applies jointly to multiple distributions of either pensions, IRAs or both. In summary it looks like combining into line 4 results in all amounts going on 4a if ANY distribution goes on 4a.

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