Appleby

TBob The earnings would also be subject to the early distribution penalty, unless an exception applies. Regarding the IRA custodian’s handling of the request….all the custodian needs is their I the custodian’s) ‘distribution request form’ completed and signed by the IRA owner…indicting that the distribution is a ‘return of excess contribution’, For instructions with calculating the earnings on the excess contribution to the IRA http://benefitslink.com/boards/index.php?showtopic=23288 (not all custodian will calculate the earnings) mbozek, Technically, the amount is distributed to the individual in 2003, and is therefore taxable in 2003. Remember, the 1099-R issued for the ineligible rollover amount (the RMD amount) removed/distributed from the IRA will show the amount as non-taxable… They are two separate transactions, 1)- a distribution of an ineligible-rollover amount, which is taxable in the year distributed and 2) an amount contributed to an IRA that does not meet the contribution eligibility requirements. If I may draw on another example…assume the individual is receiving substantially equal periodic payments, and chooses to rollover one of the payments. We know this amount is not rollover eligible. However, the 1099-R will correctly report the amount as taxable. It is then incumbent upon the individual to remove the ineligible contribution from the IRA. In the example being discussed, the 1099-R should be corrected – for correction purposes, two 1099-Rs should be issued, one to show the RMD amount as taxable, and the other to show the balance as being processed as a direct rollover.

I think we all agree that the first RMD is applicable to the year-ending 12/31 for the year the first RMD is due. However, ( to answer your question) we think the RBD (deadline to distribute first RMD amount) is 04/01 of the year following the year in which the individual reached age 70 ½ (or retires in the case of a QP/non-5 percent owner) because it simply is…As you know, the 04/01 date is significant for beneficiaries, because if the retirement account owner died before this date, he she is treated as being deceased before the RBD, for purposes of the options available to the beneficiaries. This is so even if he/she died after 12/31---but before 04/01 and even if he/she distributed the RMD before 04/01

It depends on your age. If you are at least age 59 ½, then you may withdraw the full balances tax and penalty-free. This applies if the distribution is qualified for any other reason – see http://www.investopedia.com/terms/q/qualif...istribution.asp. If the distribution is not qualified, then the amount you converted in 1998 can be taken tax and penalty-free because it has been 5-years since the conversion occurred. For the $1,000 you added in 2002, the treatment will be determined by whether it was a contribution or conversion- see http://benefitslink.com/boards/index.php?s...86&hl=qualified

Yes. The amounts will be tax-free, because you already paid taxes on the amount at the time of conversion and Penalty-free, because it has been at least five years since the amount was converted. If the amount had included earnings, then other rules would apply…. See http://benefitslink.com/boards/index.php?s...86&hl=qualified

Harwood---Would you say that the individual is not required to obtain the ITIN in order to obtain the payment, providing the ITIN is obtained after the payment is made—see § 1.1441-6 (g)(2)

In order to make a contribution to an IRA, you must have eligible ( taxable) income. See page 8 of IRS publication 590 at http://www.irs.gov/pub/irs-pdf/p590.pdf for a list of eligible compensation. If you contributed to your IRA in years that you did not have eligible compensation, then you should remove the amount form the IRA, as it accrues a 6-percent penalty for every year it remains in the IRA. The interest ( on the ineligible/excess) contribution is removed only if the contribution is being removed timely, i.e. by your tax filing deadline , plus extensions. If you file your return on time, you receive an automatic 6-months extension by the way. The earnings is taxable in the year to which the contribution applies. For instance, if you made the contribution in 2003, the earnings will be taxable in 2003, if the contribution is removed in 2003 or in 2004 ( by the deadline)

The cash you use to make the actual deposit to your IRA can come from any source. However, you must be eligible to make that contribution. Eligibility includes receiving eligible (taxable) compensation. See page 8 of IRS publication 590 at http://www.irs.gov/pub/irs-pdf/p590.pdf for a list of eligible compensation.

You could be right richardl- but I think they are just talking to one of the individuals who is not familiar on the topic (or the broker is talking to some one who is[not familiar], since the brokers usually consults with the IRA department on matters such as these). Gary, perhaps another question for the next version of your book [Already noted, THX - gsl]

Bear in mind that the Broker should report the contribution (on Form 5498) as a 2004 contribution, since they are required to report the contribution in the year received, regardless of the year to which the contribution applies. Some are able to add trailers or make other distinctions that it is a ‘contribution received in 2004 for 2003’- but this will not change the tax reporting requirements........an issue that seems to be a sore point between custodians and customers, as customers usually want the custodians to report the contribution for the year received

I agree with pax- there seems to be something missing. As is evidenced by the PLR referenced above, and many other cites including 408(d)(3)(B),an IRA owner may withdraw an amount from an IRA, and the amount will be tax and penalty free if it is rolled over within 60-days of receipt. However, there are cases when this rollover is not allowed----including: If a distribution occurs from the same IRA within 1 year after the first distribution is received form the IRA (1-year limitation not applicable to distributions used towards the purchase of a first time home) If the distribution is attributed to an RMD and so on… If the IRS “busted” someone, then that someone must have conducted a rollover of assets not considered rollover eligible. Could your friend provide any additional information ?

Form 8606 is not required. However you should have reported the amount (as non-taxable) on your tax return for 2002 (lines 15a and 15b of 1040)

No. No assets may be transferred or rolled to a SIMPLE IRA, unless those assets are from another SIMPLE IRA. Notice 98-4

T’is the season where a taxpayer may be just realizing that he/she is ineligible for that IRA contribution, and that the contribution must either be removed or recharacterized. The final regulations for calculating the income of these contributions (and Roth conversion that are being recharacterized) are available at http://www.irs.gov/pub/irs-regs/td9056.pdf

At http://www.plansponsor.com/pi_type10/?RECORD_ID=24311 (free registration required) addresses a question that has been asked quite often on this board. In a nutshell not receiving your quarterly statements is no excuse for not making your loan payments

Kirk- I like your suggestion. I made an appointment with my tattoist (or is it tattoo person) Hey TBob, Wouldn’t that be like a person talking about their drinking problem in a bar? “Hey Barkeep, I’ll have what he is having!”

Oh. And I am getting a bumper sticker that says "I Love http://benefitslink.com/boards/index.php "

OK. That’s it. No more fun posts. You hear me? No more!!! This board is addictive enough already. You are not helping my twelve-step program to wean myself from it. Hi – My name is Appleby, and I am a Benefitslinkmessageboradaholic I will lower my standards, I will and beg, grovel and employ other means that I find abhorring just to get access to a computer so that I can visit http://benefitslink.com/boards/index.php I post at all hours of the day. I visit the board when I am at home, when I am at work, when I am on vacation with my family. If I awake for any reason in the wee hours of the morning, I visit the board, I visit the board, and I visit the board…

Me too

The deadline for contributing to an IRA for 2003 is April 15,2004. As you may know, you must meet certain requirements in order to be considered ‘eligible’ to contribute to an IRA. For details, see IRS publication 590, available at www.irs.gov…. use the second (lower)search bar to locate the publication

I agree with Derelict. The current IRAs should already be registered as Derelict indicated above. Different custodian uses different styles/format—any style of registration is acceptable, providing the title includes the name of the deceased and the name of the beneficiary, and the TIN of the beneficiary. The key is to show that the IRA once belonged to the deceased.

MRDs are deemed made on the date postmarked not on a subsequent date? On what do you base this mbozek? I hope not 1.408-4(a)(2). I agree IRA contributions are deemed made by the date of the postmark- but never heard that about RMDs. In fact, many custodians required RMD requests to be received by them by certain dates in order to guarantee that it will be processed and reported as an RMD for the year. Some institute deadlines as early as December 1 and do not accept postmarks. They cannot do so ( institute deadlines) for IRA contributions, as the law is clear about the postmark applicability. Custodians backdating RMD requests to the previous year is an operational decision and good customer service- not a requirement. I think you know this---therefore, the related statement does not support your point or disprove mine. I agree that my example would not occur very often- that was just an example to demonstrate my point. You said “Under your logic these would be distributions because the check was deposited before it is honored by the payor custodian's bank” I agree that they would be distributions- but not for the reason you state. They would be distributions because they are considered paid to the IRA owner, as opposed to being paid to a successor custodian FBO the IRA owner. Much of what you say makes sense- but it seems we have to agree to disagree on the core issue, which is “when is a distribution considered to have occurred, if the distribution is as a result of the IRA owner drawing a check against the IRA …and the payee present said check to the Drawee on a date later than the date on which the IRA owner made the payment to the payee?"

Yes you could. But as John G explained, you may want to take the applicable fees into consideration and decide whether it is worthwhile...The custodian may charge maintenance and closing fees to the second IRA that you establish to accommodate the transfer

I am not disagreeing with your analysis- but I am not convinced- not yet anyway. The cite to which you refer states does not appear to address this timing issue I agree that a check could represent an assignment- however an assignment does not necessarily affect when the distribution actually occurs from the IRA. It would appear that in this example (being discussed) the assignment is more of a ‘promise to pay upon demand’. Let’s look at an example: John writes a check against his IRA#1. John deposits the check to his IRA#2 on December 31,2003. The IRA custodian #2 will issue a 5498 (reporting the contribution) for year 2003. The check takes a few days to complete the clearing process, and as a result, is not presented to IRA custodian # 1 until January 5th. IRA Custodian will issue the 1099-R for the year they honored ( used the check to debit John’s IRA) the check. Can you see the red flag? The end result may be OK as there is a logical explanation, but who wants to waste time explaining to the IRS, why you made a rollover contribution in 2003, when you had no distribution in 2003 or 2002? Or why you are not including on your tax return a distribution you received in 2004, for which there is no rollover contribution in 2004 or 2005? You are right on the money with the RMD explanation- but this applies because the EFT transaction occurs when the IRA is debited, ergo when the distribution occurs. If you were to use this (EFT) as an example, then it appears you should apply equal treatment to both transactions- i.e. determining when the funds left the IRA.

Refer the auditor to -Page 61-62 of 590. -The instructions for filing Form 8606. -IRC 408A(d)(4)(B) -Treas Reg § 1.408A-6, Q&A-4

I am a little uncomfortable with you using the checkbook to accomplish the rollover, because the transaction will occur in reverse order. Generally, a rollover is accomplished when the assets are (a) distributed and (b) rolled over. By using the check, your transaction will be (a) the rollover contribution and (b) the distribution, which will occur when the check has been posted to your IRA, i.e. possible several days after the rollover contribution is made to your IRA. I can’t site any regs that says this cannot be done- I doubt it has even been addressed…however, it seems all the rules relating to rollover talks about the rollover contribution being made within 60-days after the distributed assets are received, which suggests that the distribution must first occur in order for a rollover contribution to occur… I vote that you have the transaction processed as a direct trustee-to-trustee transfer, or request a distribution of the amount, and after you receive the check, deposit it as a rollover contribution to your second IRA…. it is safer to use the process that you are absolutely sure is allowable. Let’s see if anyone else can provide some insight... Regarding the withholding ---generally, IRAs with check writing capability include a provision that requires the IRA owner to waive withholding on all distributions processed VIA checks written against the IRA. If this is the case for your IRA, then withholding would not apply.