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Now Why Did I Get That Tax Form?

Discover Bank mistakenly sent me Form 1099-R.Among the many tax documents I received in January was a Form 1099-R from Discover Bank.

I wasn’t expecting it.

A 1099-R reports a distribution from a pension, retirement or similar plan, including an IRA.

It’s sent out by the payer (e.g., a plan trustee or custodian) and indicates a tax is, or may be, due on the amount distributed.


But this 1099-R should never have been sent.

The distribution it reported was a funds transfer from a maturing IRA CD at Discover to an IRA brokerage account at Pershing, a subsidiary of the Bank of New York Mellon.

It was a so-called trustee-to-trustee transfer from one traditional IRA to another — a tax-free transaction the 1099-R instructions state should not be reported.

(This is different from a rollover, where you withdraw funds from an IRA and reinvest them in another IRA within 60 days. A rollover transaction triggers a 1099-R, but, if properly done within limits, no tax.)

I don’t know why Discover made this mistake.

I’d submitted paperwork passing IRS muster — a transfer request telling Discover to send the funds directly to Pershing, containing Pershing’s signature as successor custodian.

And the transfer involved a Discover check payable to Pershing, not me.

Fortunately, I’d saved a copy of the request and convinced Discover to issue a corrected 1099-R showing no reportable distribution had occurred.

But it got me worried.

Because I have most of my IRA funds in deposit accounts, with government insurance limited to $250,000 per account, I often move money from one IRA to another.

Like anyone else, I don’t want transactions reported to the IRS unless required by law.

And, naturally, I don’t want the IRS potentially claiming taxes I don’t owe, particularly on my savings.

I have no control over human error or system glitches.

But I can protect myself by keeping copies of the documentation — not only transfer requests, but account statements showing how the transfer was booked at both ends.

Also, the IRS invites taxpayers to call it at (800) 829-1040 to request assistance if they experience trouble getting a corrected 1099-R.

And, if all else fails, you can file Form 4852 with your return, reporting that you’ve received an incorrect 1099-R and setting forth the correct information.

Nevertheless, all things considered, I’d rather not get another 1099-R — at least not until I’m 70-1/2 and have to take mandatory IRA distributions.

Is that too much to ask?

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