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457B transfer from one company to other

Forum|Forum|2 years ago
March 25, 2024
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I moved my 457b from my previous employer to my current. The previous employer classified it as non-qualifying at the time of withdrawal and deducted federal and state taxes and sent me a check and issued a W-2 showing the tax deducted. I deposited the check into my new employers qualifying 457B plan and have a letter from the current employers plan administrator stating the entire fund was deposited into a qualifying 457B. How do I enter the W-2 in turbotax to claim the refund of the tax.

Best answer by dmertz

Rollovers are only permitted between qualified retirement accounts. Rollovers from nonqualified (nongovernmental) 457(b) plans are not permitted. The distribution from the nongovernmental 457(b) is taxable and the deposit into the governmental 457(b) is an excess contribution. The excess contribution must be corrected as such, otherwise the money will be taxed a second time when later distributed as an ordinary distribution from the new employer's 457(b).

Entering a negative amount of other income to offset the taxable income from the nongovernmental 457(b) plan would be improper. The rollover chart to which AmyC linked applies only to qualified retirement accounts (governmental plans in the case of a 457(b)).

AmyC

Employee

You need to enter the w2 just like it is in the w2 section and then subtract out the amount you deposited under other income.

Subtract the amount you rolled over
1. Miscellaneous Income, 1099-A, 1099-C, Start
2. Scroll to the bottom
3. Other reportable income, Start
4. Other taxable income?
5. Select YES
6. Description 457b rollover from w2
7. Amount, enter your negative amount deposited
8. continue

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B

bipink888Author

Thank you for the answer Amy, I have a follow-up. I should this year deposit the federal and state tax refunded into my new 457b as well? I can enter that amount similarly in my tax return for this year and don't get taxed for it. Very appreciative of your detailed response.

D

dmertzAnswer

Employee

Rollovers are only permitted between qualified retirement accounts. Rollovers from nonqualified (nongovernmental) 457(b) plans are not permitted. The distribution from the nongovernmental 457(b) is taxable and the deposit into the governmental 457(b) is an excess contribution. The excess contribution must be corrected as such, otherwise the money will be taxed a second time when later distributed as an ordinary distribution from the new employer's 457(b).

Entering a negative amount of other income to offset the taxable income from the nongovernmental 457(b) plan would be improper. The rollover chart to which AmyC linked applies only to qualified retirement accounts (governmental plans in the case of a 457(b)).

B

bipink888Author

Thank you for your response, it is a transfer from a non-governmental to another non-governmental 457B account.

AmyC

Employee

Wait, full stop. Transfer is the only option. if you did a transfer, why are you showing taxable income? If it was not a proper transfer, it would be a fully taxable distribution. In addition, the receiver must make sure you do not have excess contributions. See Non-Governmental 457(b) Deferred Compensation Plans

The rules are:

For nongovernmental 457(b) plans, the only way to defer taxes would be through a direct transfer to another 457(b) plan of a tax-exempt entity [Treas. Reg. 1.457-10(b)]. A 457(b) plan of a tax-exempt entity may provide for transfers of amounts deferred by a participant to another eligible plan of a tax-exempt entity if:

the transferor plan provides for transfers;
the receiving plan provides for the receipt of transfers;
the participant or beneficiary whose amounts deferred are being transferred will have an amount deferred immediately after the transfer at least equal to the amount deferred with respect to that participant or beneficiary immediately before the transfer; and
in the case of a transfer for a participant, the participant has had a severance from employment with the transferring employer and is performing services for the entity maintaining the receiving plan.

I am really not sure what you have done to know what you should do. I am concerned you may exceed limits or have gone outside a boundary.

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