Question

1099-DIV issued on non-taxable money

Forum|Forum|2 years ago
February 21, 2024
1 reply
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I completed a rollover from a 401K to a Traditional IRA in Oct 23. I also wanted company stock transferred in kind to the IRA. The company stock was at the transfer agent (so no longer in the 401K) when the company issued a dividend. The dividend was sent to me via check along with a 1099-DIV. The check was made out to my broker FBO me/ Traditional IRA. The check was deposited in the Trad IRA. The problem is the 1099-DIV shows the dividend as Ordinary (taxable) dividends and is reported to the IRS. The transfer agent says that the 1099-DIV should go to the broker/custodian and they will somehow also report to the IRS that the dividends went to the Trad IRA so no taxable event occurs. I am only trying to understand the mechanism to how it should be reported, i.e. so no taxable event occurs. Any suggestions from someone knowledgable on the subject?

Not A Product Question

DaveF1006

No. The dividend is still taxable to you even if the dividend check was deposited into your Traditional IRA. The dividend will be treated as a non-deductible contribution in your Traditional IRA. Once you have entered the 1099 DIV information in your return, this is how you report this as an non-deductible contribution.

Login to your TurboTax Account
Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
Select “traditional IRA”
Answer “No” to “Is This a Repayment of a Retirement Distribution?”
Enter the amount you contributed
Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
Enter your basis in the Traditional IRA from your 2022 Form 8606 line 14 (if you had a basis in the prior year)
On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).