IRA withdrawal by mistake

[Guest riabaj]

I had a rollover IRA account at a brokerage until March 1-2006. They then opened another kind of account where they were charging half the fees for a trade. When I talked to them, they assured me that I could move my rollover IRA into this account and it would still be an IRA account. Now, they are sending me a 1099 and are treating it as a withdrawal. I am in my thirties and this would be a huge tax burden for me. I never touched the money in the new account, never made any withdrawals from or deposits to it either. How do I fix this? I would like to go back to having my money in the rollover IRA as before. Thankyou for your help.

Ria

[Jim Chad]

It sounds likethey did a conversion or distribution- instead of a rollover. By this, I mean, a conversion to an after tax IRA or maybe an outright distribution.

I would suggest calling them and see if they can:

1. Verify that the new account wats titled correctly. If not, ask them to fix it.

2. Send a corrected 1099 to you showing -0- (zero) taxable

[QDROphile]

If the new account was not an IRA, you also need an IRS ruling that the repair worked. If the broker was at fault, it should get the ruling for you.

[k man]

If the new account was not an IRA, you also need an IRS ruling that the repair worked. If the broker was at fault, it should get the ruling for you.

no necessarily correct. that is if the money is deposited back into an IRA within one year you would be eligible for the automatic waiver of the 60-day rollover rule, provided of course that the broker was at fault and you have not been using the money. however if it has been more than one year you will need to get a ruling.

[masteff]

You will get a 1099-R, even if you do a rollover w/ the same company.

The first step is to confirm if the new account is an IRA or not.

Second, what you need to look at is the distribution code on the 1099-R. If your 1099-R shows it was a rollover, then follow the instructions for line 15 on Form 1040. If the 1099-R shows it was a distribution, then all you have to do is file Form 5329 (with your 1040) to show that you rolled the money over.

[JanetM]

Ria,

Does the 1099 have a code 1 or code G? You only have a problem is the code is 1.

[Guest riabaj]

Thank you all for your replies. I am very grateful for your time and knowledge. I am trying to get this matter (distribution) resolved thru the brokerage. But, if they will not help me, how do I go about getting a ruling from the IRS? How long will this take? Do I have to pay the taxes due on the distribution in the meantime and recoup them later?

Thankyou

Ria

[Appleby]

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