I got a CP2000 from the IRS for 2016. It concerns three retirement account transactions.

  1. A direct rollover from an existing IRA to a Solo 401K (a qualified plan; 1099-R Code G in box 7)
  2. In 2016, I started to do a backdoor Roth and realized that I could not, so I had the funds returned. These also triggered a 1099-R, and I think the code was "81" or "82" (I don't have it in front of me).
  3. As #2, but for my wife.

It's not clear to me why the IRS thinks these would be taxable events. For #1, the code in Box 7 seems to answer any question they would have about the transaction. How do I further "prove" that this was a roll into a qualified plan?

For #2 and #3, I contributed post-tax dollars and had them returned. If the contributions and returned funds were pre-tax dollars, wouldn't I have had to claim a deduction for that contribution? Even if I had completed the backdoor Roth, it would have been with post-tax funds.

What will the IRS see as sufficient evidence as a response to incorrectly calling these distributions taxable?

  • 1
    Please edit Item 1. Did you roll over from an IRA to a Solo 401(k) and then to a different qualified plan (which suggests that the Solo 401k is not a qualified plan) or is the qualified plan the Solo 401(k) itself, i.e. there was only one rollover? – Dilip Sarwate Aug 30 '18 at 15:30

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