Made an Indirect IRA Rollover Reporting Mistake?

Solo 401k

There are several options available to respond to the IRS changes to a tax return for an unreported IRA indirect rollover. IRS changes with a $6978 penalty and $1541 interest charges

1. Provide a statement, as part of your response, that an indirect rollover was made, within the 60 day period, to the Solo 401k plan. Provide copies of the Solo 401k bank statement reflecting the deposit and the Solo-k name on the account.

2. Prepare an amended return on 1040X writing "CP2000" on the top of the form. Include the amended return with your response. On the amended return fill in box 15a with the amount of the indirect rollover, and in box 15b write “$0 ROLLOVER”. (If your accountant has any questions about this, please refer them to page 24 of the IRS’s 2012 1040 Instructions. or see Publication 575)

3. Although it is not necessary to file a 5500EZ for a Solo 401(k) that has less than $250k of assets, a plan holder may file if he wishes. This would be a possible way to advise the IRS of the indirect rollover.  Simply fill in the amount of the indirect rollover in box 8 C and the IRS will cross reference this with the 1099R. Thus no taxes will be due. Include a copy of the filing with your response to the letter. Currently the IRS is allowing filing of prior years' 5500EZs without penalty.

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