Consequences to IRA custodian for accepting non eligible funds

[Guest neco]

Can someone help me to determine what the consequences may be for an IRA custodian who knowingly accepts funds that do not qualify as rollover funds because the time limit for making the rollover contribution was exceeded?

[mbozek]

The IRA owner needs to read the custodial account agreement to to determine what are the disclaimers of liability by the custodian. Most custodians limit their liability for incorrect rollovers and require some statement for the IRA owner that the distribution is eligible for a rollover. I dont know what you mean by "knowingly accepts" inelgible funds. What kind of knowledge is imputed to the custodian? Also any question of liability by a securities broker is subject to mandatory arbitration.

[Appleby]

True-- and most custodians require a signed rollover contribution form, which includes language to the effect that the IRA owner is aware of the rollover rules as well as a hold harmless clause

[BPickerCPA]

Keep in mind that EGTRRA now permits the IRS to extend the 60 day deadline, so it appears (absent any guidelines to the contrary) that a custodian could accept the late rollover while the taxpayer goes for a ruling as to its acceptability.