The Internal Revenue Service will ding you with penalties and taxes if you take money out of your individual retirement account early. However, if you simply want to move your money from one IRA to another, it won't cost you a thing. An IRA rollover is a tax-free event as long as you complete the transfer within 60 days. Otherwise, the IRS will deem your rollover to be a withdrawal, and you'll face taxes and a 10 percent penalty for distributions before age 59 1/2. Even if you don't owe taxes, you'll have to report the rollover on your income tax return.
Step 1
Locate your Form 1099-R. Your IRA custodian, or the firm that hosts your IRA account, will send you this tax form at the end of any year in which you take a distribution or perform a rollover. It will contain all the information you need to report to the IRS regarding your rollover.
Step 2
Confirm the amount in box 1 of your 1099-R. This box should show the exact amount of your rollover distribution.
Step 3
Verify that there is no taxable amount listed in box 2a of Form 1099-R. Since your rollover is tax-free, the amount in box 2a, which shows the taxable amount of your distribution, should be zero.
Step 4
Check the distribution code in box 7 of Form 1099-R. For an IRA rollover, box 7 should show a code of "G." Any other code might affect your tax liability.
Step 5
Transfer the rollover amount to Form 1040 or 1040A. You cannot report a rollover on Form 1040EZ. For Form 1040A, the amount of your rollover goes on line 11a, with the taxable amount -- which should be zero -- going on line 11b. For Form 1040, report the full rollover amount on line 15a, with zero listed on line 15b. In both cases, write the word "rollover" next to the taxable amount of zero.
