I have two IRAs: a Simple IRA (for more than two years), which I contribute to every month, and a Rollover IRA, which I use for automated trading. I had the Simple IRA broker do a trustee-to-trustee transfer, to the Rollover IRA broker. Obviously, it's within the 60-day window and should not be taxed. However, here is what happened:

The transferring broker (Simple IRA broker) issued a 1099-R, with Box 1 (Gross distribution) and Box 2a (Taxable amount) filled in with the amount I transferred.

The receiving broker (Rollover IRA) issued nothing.

Therefore, the IRS is trying to charge me a large amount of taxes for "early withdrawal".

Question: What should each broker have filed (if anything), and what should I have filed (if anything) on my return?

The receiving broker (Rollover IRA) says it is not a reportable event, and therefore they should NOT issue a for 5498 (IRA contribution).

The sending broker says "a Simple IRA distribution is considered an indirect rollover and must be coded as either Distribution code 1 or 7 on the 1099-R form. You should have received a 5498 from the receiving broker."

Of course, the IRS doesn't care that I produced documentation showing the transfer from one IRA to another on the same day.



To solve this problem, I had to get the receiving broker to issue a 5498. They did so after I provided them with the 1099-R from the sending broker. Then I sent it to the IRS. A couple of things I learned:

  • The IRS doesn't care about what other evidence you can provide. If they don't get a matching 5498 with the incoming money, they will issue a NOTICE OF DEFICIENCY by certified mail.
  • At that point you have 90 days to petition the tax court (they provide a form) which requires a personal appearance and is only located in some cities. I guess, if I never got the 5498, I could have presented the evidence to a judge.
  • There actually is a "trustee-to-trustee transfer" which does not get reported to the IRS. However, both brokers must code the transfer this way. I had a problem because the sending broker did, but the receiving broker didn't.
  • 1
    Are you being audited? If so - get a tax attorney. The IRS doesn't care? They should.
    – littleadv
    Commented Dec 29, 2011 at 21:07

1 Answer 1


http://www.irs.gov/pub/irs-pdf/f5498.pdf see the instructions for box 2, it's used to report incoming rollover/transfers. The receiving broker should be acknowledging the transfer with the 5498.

If you read the PDF carefully, any incoming money is reported this way.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .