Free annual audit
Did your rollover actually work?
Most people complete a rollover and never think about it again. But 6 things quietly go wrong in the 12-24 months after: funds sit in cash, 1099-R arrives miscoded, beneficiary wasn't updated, excess contributions accumulate. This audit catches them.
Are the rolled-over funds currently invested (not sitting in cash / money market)?
Was your 1099-R coded Box 7 = G (direct rollover)?
Did you receive Form 5498 from the destination by May 31 of the year following the rollover?
Did you set or update the beneficiary on your destination IRA?
Are you confident you haven't over-contributed to an IRA this year or last?
If you do backdoor Roth conversions annually, do you have any pre-tax IRA balance (including this rollover)?
The 6 things that quietly go wrong
- Funds arrived as cash and never got reinvested. Mutual-fund liquidations often arrive as cash at the destination; if you don't notice, you're sitting in 0.5% money market while inflation eats 3-7%/year. Check destination “activity” tab for transactions tagged “Rollover In” — was it invested afterward?
- 1099-R arrived with wrong Box 7 code. Custodians regularly miscode direct rollovers as “early distribution” (code 1) instead of “direct rollover” (code G). Goes unnoticed until IRS sends a CP2000 notice 12-18 months later.
- Form 5498 mismatch with 1099-R. The destination's Form 5498 (filed by May 31) should match the source's 1099-R rollover. Timing mismatches are an audit trigger.
- Beneficiary designation never updated. The destination IRA needs its own beneficiary form. Old 401(k) had your ex-spouse. New IRA defaults to your estate (creates probate disaster).
- Excess contributions next year. If you've been contributing to an IRA, the rollover doesn't count toward annual contribution limit — but some users miscount and over-contribute, triggering 6% excise tax per year until removed.
- Backdoor Roth pro-rata trap. If you do backdoor Roth conversions annually and your rollover landed in a Traditional IRA, you now have a pre-tax balance that taxes a portion of every conversion going forward.
This audit provides educational checkpoints. It is not personalized financial or tax advice. If any check fails, consult a CPA before taking corrective action.