Appleby

I wonder how they come up with this list. Sorta like those poll results that no one you know has ever been polled for ?

Have a client who is age 51 and wants to know if she should retire, take her money and run before the new rules kick in ( for calculating lump-sum payments). She is also trying to determine amounts , should she stay with the company until age 59 1/2. Anyone know of a calculator that uses the new rules? I searched high and low, but no luck.

The 1099-R would have a G only if the assets were processed as a direct rollover to a qualified plan or 403(b) account. If you have proof that the financial institution told you that the receiving account would be treated as an IRA, you may have some recourse. Maybe they record their calls? And if they do, maybe you noted the time and date of the call so it can be reviewed? In some cases, even if it can be proven that they gave you wrong information, they may be unwilling to make any adjustments, especially if disclosure was provided on the forms you completed. The automatic extension of the 60-day period ( to one year) applies only if everything was in good order at the time the amount was credited to the non-IRA account. For instance, if operational requirements were met- such as rollover contribution forms completed and signed ( by you). If other words, if you did everything right, and they made a mistake. Asking the IRS for an extension is also a gamble. They have rejected many requests for extensions, where it could not be demonstrated that the IRA owner was not at fault or had not control over the issue. Consider too the fee: • $500 for rollovers of amounts less than $50,000 • $1,500 for rollovers of amounts equal to or greater than $50,000, but less than $100,000 • $3,000 for rollovers of amounts equal to or greater than $100,000 You may want to take a look at some PLRs to see why the IRS approved or denied the request. Examples of approved: 200401025, 200407025, 200407023 and 200427029 Examples of denied : 200526024 and 200549017 You may want to go back to the financial institution. The louder your voice, the more likely you will be heard. Demand to speak with a manager. If you still want to pursue the PLR, the instructions are available in Revenue Procedure 2003-4. The new fees are in Rev. Proc. 2006-8

2006 2007, the year the contribution was deposited to the plan So was the first person who responded and said 2006 incorrect? Sorry, but I just want to get a 100% final answer. Looks like we were typing at the same time. The issue of determining active participant status is kinda convoluted. The type of plan must be considered. Had the plan been a money purchase pension plan, then the answer would have been 2006. For a profit sharing or SEP IRA, it would be 2007 for the question you posed

Yes, you are correct. I went off of my W-2 having box 13 blank with no check for me being in a retirement plan. So I guess when I am painfully learning is that if my employer makes a PS contribution in 2007, but says it is for 2006 ... no matter if box 13 is marked or not on my W-2 ... I am covered by a defined contribution plan for the year 2006 & can't use my IRA as a tax deduction? If the profit sharing plan is the only plan in question, and the contribution was deposited in 2007, then the W-2 is correct. You are not active for 2006. You are active for 2007, the year the contribution was deposited to the plan

2006 2007, the year the contribution was deposited to the plan

So true, so true. It has gotten so bad, than some firms have had to create groups that are solely responsible for handling such mistakes and addressing such misunderstanding.

You are right: 403(b)s are not included. Neither are defined contribution or defined benefit plans. Reminder: When any of an individual’s non-Roth IRAs include amounts attributable to nondeductible contribution or rollover of after-tax amounts ( basis) ,Form 8606 must be filed for any year that a distribution or conversion occurs from any of the individuals non-Roth IRAs. PS. Thanks for the feedback .

A distribution of the $3,000 regular contribution is tax and penalty-free A distribution of the Roth conversion amount would be tax-free. It would also be penalty-free if the conversion has aged at least five-years. Any amount converted in 2000 aged five years at the end of 2004 If your aggregate distributions to date, from your Roth IRA exceed your aggregate contributions +conversions, the amount by which the (contribution + conversion) is exceeded is attributable to earnings. The earnings are subject to income tax and early distribution penalties., unless the distribution is qualified. The penalty is waived if an exception applies

I too am not sure what exactly occurred. If you moved the assets from a Traditional IRA to a Roth IRA, that would be a Roth conversion and not a transfer. The Roth conversion would be reported on IRS Form 1099-R ( issued by Vanguard) and 5498 ( issues by E-Trade) and should be included on your tax return. If the transaction was in fact processed as a transfer, one of two mistakes occurred: The transaction was processed as a transfer in error, resulting in no tax reporting being done by the IRA custodians The receiving account should have been a Traditional IRA Questions: Was your intent to have the transaction processed as a conversion? Was it processed as a conversion? Was any tax forms issued (you should have received any 1099-R by now) What exactly do you mean when you say “, I've discovered that I was not supposed to add anything to my Roth IRA account because I would be (am) in excess.”

SEPs and SIMPLEs are included. Therefore, all your Traditional, SEP and SIMPLE IRAs are treated as one IRA, when determining how much of the converted amount is attributed to your basis ( non-taxable balance). Denise

1. No 2. Not as far as I know

Also Pershing LLC www.pershing.com, available through one of their introducing broker dealers

Check IRC 1563(e)(5) ...for corporations

You would pay the 6% excise tax only if the excess only if it is not removed from the Roth IRA by October 15 of next year . If you decide not to recharacterize the amount to a Traditional IRA, removing the excess amount by the deadline, along with an NIA would correct the excess without penalty. See post at http://benefitslink.com/boards/index.php?showtopic=35097

Was the amount contributed to a type of fixed investment, such as a certificate-of-deposit? Just want to understand why the early withdrawal penalty would apply. Another option would be to recharacterize the excess amount to a Traditional IRA. This would allow you to keep the amount as an IRA contribution, just in a different type of account.

The amount used to pay they UBIT should not be reported as a distribution from the IRA on Form 1099-R. I agree with mjb about asking the custodian. If they are saying it is treated as a distribution, then they should be able to provide a cite for their position. I also agree with Becky that it should not be a distribution. IRS Publication 598 and the Instructions for Form 990-T talks about filing a Form 990-T for the amount. None of these documents talks about reporting the amount as a distribution from the IRA. This is unlike the instructtions for reporting an IRS Levy, which requires the amount to be reported as a distribution.

Sure, In order for the amount to be a true ‘return-of-excess’, the Net Income Attributable (NIA) must accompany the excess contribution that is removed on a timely basis. The key is to ensure that the instructions submitted to the financial institution clearly show that the transaction is a ‘return of excess contribution’ and not a regular distribution. Unfortunately, this is a mistake that is often made when completing the forms, resulting in no earnings/losses being removed with the excess and the amount being reported as a regular taxable distribution. Even if the proper instructions are submitted to the financial institution, someone should follow-up to make sure it is processed correctly- as mistakes are sometimes made by financial institutions. In short: ----The correct amount should be removed ----If the amount is removed by the deadline, the NIA must be included. The instruction to the financial institution should distinguish the excess amount and the NIA, unless the financial institution calculates the amount ----If the amount is removed timely, and processed properly, the taxable amount in box 2a should reflect only earnings Note: Since the NIA could be a loss, it is possible that the amount received from the IRA for the transaction is less than the amount contributed to the IRA. If that situation arises, the IRA owner may want to include a letter with the check, and a copy of the calculation, to show how the amount was determined. Please post any follow-up questions. Denise

Further, the earnings would be taxable only if the distribution is non-qualified. However, based on the ordering rules, you will never get to the earnings until you have withdrawn all regular contribution amounts, plus all conversion amounts. See http://www.retirementdictionary.com/Ordering-rules.htm and http://www.retirementdictionary.com/qualif...bution-roth.htm

Generally, excess amounts, including those attributed to ineligible rollovers, must be removed from the IRA by the IRA owner’s tax filing deadline, including extensions. Individuals who file their return or taxi fling extension by April 15 (April 17 for this year), receive a 6-months automatic extension to correct the excess – i.e. to October 15. Therefore, if the rollover occurred last year, he has until October 15 of this year to remove the excess amounts along with any earnings. The excess amount is not taxable and is not included in his earnings. Any earnings would be taxable. He will receive another 1099-R amount for the return-of-excess from the IRA. But if the amount if removed timely, and processed properly, the 1099-R should reflect only any earnings as taxable. Earnings are computed using the formula in TD9056, available at http://www.irs.gov/pub/irs-regs/td9056.pdf Some custodians will compute the earnings.

More links http://www.irs.gov/retirement/article/0,,id=165131,00.html

http://benefitslink.com/boards/index.php?s...c=33070&hl=

http://benefitslink.com/boards/index.php?s...c=33070&hl=

It is something that I have seen occurring only too often- but I do not recall seeing anything citable that addresses how it can be corrected. It seems that it is an ineligible rollover to the Roth IRA , subject to correction as a return-of-excess., and a regular distribution-includible in income-from the QP. If the plan processes the transaction as a direct rollover, per the participant’s instructions, I don’t think they are required to –or would even consider taking back those assets.

See http://benefitslink.com/boards/index.php?showtopic=20842