Investment Firm Refuses To Correct 1099-DIV

[mming]

A client recently mentioned that they received a 2012 1099-DIV for his qualified plan's account that incorrectly shows the earnings as being taxable. Although there is ample time for the investment firm to file a corrected form with the IRS, they are refusing to do so, claiming that they were never informed that the account was a non-taxable one, even though it has always been titled under the plan's name with the plan's trust ID number. The client even checked on the account's original application the box indicating that this will be a retirement plan account. The reasoning given by the firm is that years ago when the account's application was submitted, an additional box should have been checked indicating that the client believes the account is exempt from information reporting to the IRS (instructions for that box were very general and simplistic, with no details as to what type of reporting they were referring to). The client did not check the box because he knew he had to file 5500s every year and 1099Rs if distributions occur, and thus the account would not be exempt from information reporting. The investment firm is not acknowledging that the instructions for the box were vague and will only say they do not correct 1099 forms if it's the result of client error, as they deem this to be. Even if the client was "wrong" in not checking some box with poorly worded instructions on the application years ago, they will not accept that it may have been a misunderstanding and that they are now being given correct information that should result in a revised 1099 (they have been generating 1099s showing taxable earnings every year, but the client did not notice until now). The only help they can offer is that staring with the 2013 reporting, the earnings will be shown as nontaxable since the client sent them a W-9 showing the plan to be exempt the other day. Given that they now have accurate information and that the filing deadline has not passed yet, their reluctance to correct the 1099 seems to be a violation of the firm's responsibility - they are reporting a significant tax liability to the IRS that does not exist and will not do anything about it. What recourse does the client have? Is he forced to somehow file a corrected 1099 form himself (although finding one to fill out may be problematic)? Are there government agencies or watchdog groups that can be contacted for assistance and who can determine whether the firm is acting inappropriately?

[Bird]

Nice of you to be so concerned - you must be young and not so jaded - but I wouldn't worry about it. If the IRS looks into it (unlikely), they just explain that it was a retirement account and miscoded.

[masteff]

I agree with Bird. The Service will match the TIN to the plan, possibly check the 5500 to see that some form of earnings were noted there and that will be the end of it.

[MoJo]

I would simply add that if the investment firm is so inept and recalcitrant, perhaps it is time to find another investment firm....

[mbozek]

Looks like a case of no harm, no foul.

[MoJo]

Looks like a case of no harm, no foul.

Yes, but no harm no foul doesn't mean it's "right" and doesn't inspire confidence in their ability to perhaps do other things that may appear "ministerial" but nonetheless *DO* have an impact. Sorry to be a stickler, but the PLAN is the CLIENT and the investment house isn't trating the client very well when they make stupid mistakes and then refuse to correct them.

[mbozek]

Looks like a case of no harm, no foul.

Yes, but no harm no foul doesn't mean it's "right" and doesn't inspire confidence in their ability to perhaps do other things that may appear "ministerial" but nonetheless *DO* have an impact. Sorry to be a stickler, but the PLAN is the CLIENT and the investment house isn't trating the client very well when they make stupid mistakes and then refuse to correct them.

I dont know why you are getting excited over an admin glitch that has no adverse consequences to the plan. I have seen this error before and plans do not think anything of it.

If you had read the OP you would have noticed that problem was caused by failure of the plan to check the right box on the w-9. It was not a mistake of the financial institution which must rely on the client to correctly code the forms they fle with IRS because financial institutions cannot provide tax advice. Client should have had tax advisor review

w-9.

Problem will go away in future years since w-9 has been revised.

[MoJo]

Looks like a case of no harm, no foul.

Yes, but no harm no foul doesn't mean it's "right" and doesn't inspire confidence in their ability to perhaps do other things that may appear "ministerial" but nonetheless *DO* have an impact. Sorry to be a stickler, but the PLAN is the CLIENT and the investment house isn't trating the client very well when they make stupid mistakes and then refuse to correct them.

I dont know why you are getting excited over an admin glitch that has no adverse consequences to the plan. I have seen this error before and plans do not think anything of it.

If you had read the OP you would have noticed that problem was caused by failure of the plan to check the right box on the w-9. It was not a mistake of the financial institution which must rely on the client to correctly code the forms they fle with IRS because financial institutions cannot provide tax advice. Client should have had tax advisor review

w-9.

Problem will go away in future years since w-9 has been revised.

I get excited over it because there is NO excuse for sloppiness - and it is evidence of a culture of carelessness that might infiltrate an area that IS of concern to the plan.

Businesses are competitive. I do business with those that pay attention to the details - and demonstrate a committment to being error free and responsive. Erros happen, but the way they resolve them is truly indicative of the kind of company they are.

In addition, the plan is the CLIENT of the investment house - not the other way around. Those who don't serve CLIENTS well, don't deserve to be in business.

Why are you so nonchalant about 1) an ERROR that was made; and 2) (and most importantly) their ARROGANT, DEFIANT, AND NON-CLIENT SERVING refusal to make a simple correction?

Right is right. Good client service is it's own justification.

[Lou S.]

Yes an error was made by the client when they failed failed to provide a correct w-9. It has been fixed. Most of us don't really see any problem.

But if it bothers you that much, talk to your client about moving the assets to a diffrent custodian.

[WDIK]

At some point in my career, I must have crossed a some sort of "personal-mistake-threshold", because I don't get nearly as worked up about situations like this as I used to.