Going from Roth to Traditional IRA

[katieinny]

Jim has a Roth IRA that he moves to another brokerage firm. Two years go by before he discovers that the brokerage firm put the money in a traditional IRA. Now what?

[JanetM]

Does he have any of the original paperwork for the second IRA? Was the mistake made by brokerage staff when forms clearly indicat Roth ? If so he could go to brokerage firm and get them to fix the mistake and reclassify.

[katieinny]

The information I have so far seems to indicate that the brokerage firm knows they made a mistake, but they don't seem to know how to fix it. Like you, I thought that either reversing the transaction, or recoding the account would do the trick, but the message I'm getting is that it's not that simple. I suppose they could do a conversion from what is now a traditional IRA to a Roth IRA -- as long as the brokerage firm is willing to pay the tax on the distribution!

[JanetM]

If the brokerage firm can't figure out how to fix it, it makes me think someone at the brokerage firm has not fessed up the mistake to the proper people. I don't understand why it isn't simple fix? There is no income tax reporting on either accout and no deductions on Jims 1040.

Just retitle account and get the right.

Since the IRA contract is legal contract you may have to attorney who knows contract law. Tell Jim the quickest way to get something done is to tell his contact they have 30 days to present a solution or he will contact his lawyer.

[masteff]

I suppose they could do a conversion from what is now a traditional IRA to a Roth IRA -- as long as the brokerage firm is willing to pay the tax on the distribution!

I'm w/ Janet. Don't even let them go down any path that results in taxation (even if paid by the brokerage). If Jim's not talking to the branch manager at this point, then he needs to move up the ladder.

[Appleby]

I suppose they could do a conversion from what is now a traditional IRA to a Roth IRA -- as long as the brokerage firm is willing to pay the tax on the distribution!

I'm w/ Janet. Don't even let them go down any path that results in taxation (even if paid by the brokerage). If Jim's not talking to the branch manager at this point, then he needs to move up the ladder.

Ditto!

You just need to talk to the right people and say the right things. They must fix it if the client did not make the mistake. Start by obtaining copies of all the paperwork that was signed for the transaction. In this case, they may still need to fix the error even if the client signed the wrong paperwork (Roth to TIRA)- as they should know better than to allow a transfer between a RIRA and a TIRA.