Just discovered 1998 Roth conversion was not completed.

[Guest Steve Palmer]

Taxpayer intended to roll traditional IRA from a CD at bank into a Roth IRA with broker in 1998. Reported as Roth conversion on 1998 return and paid tax on 1/4. Broker or taxpayer erred and R/O went into traditional IRA at broker. Is there a fix for this error? (Other than amending 1998)

Thank you.

[John G]

This should fall under the errors and omissions catagory like you find in home closings... if someone makes a mistake, you sign in advance that the title company can correct the error. Unfortunately, I don't think the IRS will allow this correction. The funds had to be in the account by the end of the conversion year.

Unfair? Well, your client has some responsibility for checking the custodian's work and the statements that they send.

ATTENTION ALL CONVERTERS: Learn the lessons: (1) don't wait to the last minute to get a conversion done, and (2) double check the custodians work and statements. A little proactive effort to monitor your own accounts will catch these problems in time.

If the client gave absolutely clear instructions in writing (one prior message board person even got a receipt that said Roth but it wasn't) then you can ask the custodian to pay for the refiling of your taxes. If the client no longer qualifies to convert now, you may need to go to arbitration over damages.