401K RMD Rollover Tax withholdings

Stephen R

Due to the change in law this year I don't need to do a 2020 RMD and I can roll it back. How do I record a rollover (payback) of a RMD I took in January. I don't know how to deal with reversing FED/State withholdings to balance between accounts. (Where do I plus back in the $1,000 & $500)
1. 401K Acct - WithdrawX $10,000 to Saving Acct
2. Savings Acct - Split deposit - $10,000, minus Fed wh $1,000, minus State wh $500 - Total deposited $8,500.
Now to do the Rollover/payback (requires full amount of $10,000 to the 401K.
3. I have transferred $10,000 from my Saving to Checking to be mailed in to broker 401K account.
So now my Checking shows a transfer to 401k. The receiving 401K shows it as a ContribX of $10,000.
So my question is how do I deal/record the reversing (add back) the Withholding amounts? So the TAX report shows the plus/minus for both FED/State $0.00. (I know this should be simple, but I can't get my head around it.)
Steve

J_Mike

Here is a link to a recent discussion on the same topic;

How to show repaid RMD such that net is zero?

Frankx

Hi @Stephen R,

You raise an interesting question. 

So, if I understand correctly, you now have the correct balance for your 401(k) in Quicken - because your withdrew 10k and repaid the 10k.  The issue is the tax withholdings of $1,500., and the answer likely is that you won't need to do anything about those. 

The reason is that since your broker/sponsor/former employer (i.e. the entity that administers your 401(k) plan) apparently instructed you to make the payback amount the full 10k, they apparently won't be refunding the tax withholdings.  Right now, those withholdings are presumably recorded as prepaid federal and state tax categories (i.e. for tax year 2020) in Quicken.  The "TAX report" in Quicken should not show any "minus" because you paid the taxes and they were never refunded - so you are likely overpaid for tax year 2020 by $1,500.  If you want to get that $1,500 back (rather than waiting until after you file your 2020 tax returns next Spring), you should either decrease your estimated tax payments, or decrease payroll tax withholdings (from whatever sources may be making current withholdings, etc.).

Hope this helps!  Let me know if you have any followups.

Frankx

volvogirl

I agree with Frank.  That is a prepayment of Tax.  I wonder how your 1099R will look like next year.  0 distribution and 1,000 in box 4 for withholding?  I would ask the plan how it will be reported.  Let us know.

volvogirl

OK I asked over in the Turbo Tax forum.  You will get a normal 1099R for the 10,000 and withholding.  When you enter it on your tax return you select you rolled it over to another account (actually back into the same account).  So it won't be taxable. It should say ROLLOVER by the Pension line on your tax return, line 4d on a 2019 return.  Don't know if they will change the line numbers again for 2020.   Then you get will get credit for the withholding. If it's more than any tax on all your income you will get a refund.  

Stephen R

Hi ALL,
Thanks for your comments. I'm trying to make my Quicken accounts balance out correctly. 401K# out $10k / in from Checking# $10k = 0. Here's where the problem begins, Saving# received $10K from 401K# but only $8,500 cash was deposited to current # balance. $1,500 is recorded as tax wh.
The RMD has to be paid back at 100%.
How do you "reverse the tax wh" to be able to send the full $10k back to the 401K from the Saving#? How do you free up the $1,500?
(Think of it this way - Saving# balance = $0, deposit $10K from 401K# less $1,500 for tax wh, available balance is now = $8,500.
Steve

volvogirl

You don't do anything with the withholding.  You leave it in the tax withholding category.  You get it back as a credit when you file your tax return next year.  Where did you get the full 10,000 to repay it?  You have to get the 1,500 from your own money.  It just comes out of your checking account and goes back to the 401K account.  How are you recording it in the 401K?  Are you going to reverse or delete the first RMD transaction?  Or enter it like a new contribution?  

Frankx

Hi again @Stephen R,

The change in the tax requirements for RMD's didn't happen until late March.  As I noted above, unfortunately there is no way for you to "reverse" the tax withholding and because the withdrawal transaction happened so early in the year (i.e. January), the Payer (the plan's administrator) had already remitted it to the federal and state tax authorities.  

Your Quicken accounts are already in balance.  You have received a cash distribution of $8,500. and at the same time, you "made" two tax prepayments ( Federal of $1,000. and State of $500.)  If you haven't yet paid back the RMD, then once you do make the full $10,000 repayment, it will still be in balance.  You'll get tax credits on your 2020 tax returns totaling $1,500. 

Frank

Stephen R

Thank you all for your comments and advice. Much appreciated...