IRA roll over question

[hopedale]

Need some help from the GS.

My Dad just got hit with a $7k bill from the IRS. When he rolled over his IRA, the Agent of the company he did business with didn't submit a form that was needed, so the IRS looks at the money as being pulled from his IRA.

The IRS instructed my Dad to have the Company managing his account to submit some form. (can't remember the form name). That company first stated they couldn't submit the form, as my Dad has made additional contributions, and then he was informed the product he rolled his money into was not qualified for an IRA roll over. Which is why now they can't submit the form. He called the Agent that sold him the product and they insist it is a product eligible for an IRA roll over.

My question to the GS Finance experts or Tax experts is should my Dad pay the IRS, and fight it out with the Company managing his money?

I've asked him to get a meeting with the Agent and Customer Service Rep to record the meeting and allow his Agent to stand by her claim the product is IRA eligible.

To me it either is and they need to submit the form, or it isn't and they need to pay restitution. He moved his money based on their recommendation of that company's Agent.

What say the GS?

[Bisch]

Good luck!

If it is an eligible rollover, then the form should be submitted and everything straightened out.

If not, I would bet my bottom dollar that you will never get the company to pony up and you dad will be out the $7000!

I retired in 2011 and because an idiot at ING had no clue what he was talking about, I had to pay $1900 in taxes on money I never got in my hands. I was and am still peeved pretty bad about it.

I hope it works out for the best.

Bisch

[RJK70]

Sad thing is a lot of the people who work for these investment/retirement companies are not the top of the line folks and have no major qualifications. It is definitely worth doing research on your own before committing to one of them.

[rubydog]

Need some help from the GS.

My Dad just got hit with a $7k bill from the IRS. When he rolled over his IRA, the Agent of the company he did business with didn't submit a form that was needed, so the IRS looks at the money as being pulled from his IRA.

The IRS instructed my Dad to have the Company managing his account to submit some form. (can't remember the form name). That company first stated they couldn't submit the form, as my Dad has made additional contributions, and then he was informed the product he rolled his money into was not qualified for an IRA roll over. Which is why now they can't submit the form. He called the Agent that sold him the product and they insist it is a product eligible for an IRA roll over.

My question to the GS Finance experts or Tax experts is should my Dad pay the IRS, and fight it out with the Company managing his money?

I've asked him to get a meeting with the Agent and Customer Service Rep to record the meeting and allow his Agent to stand by her claim the product is IRA eligible.

To me it either is and they need to submit the form, or it isn't and they need to pay restitution. He moved his money based on their recommendation of that company's Agent.

What say the GS?

Find out who this persons agency manager is if he is not just an independant. Contact management with the company that he filed the roll over through. Any consultant worth his salt knows what has to be done on an IRA or 401k roll over. Be very clear that if this issue isn't straightened up with no cost to your Dad that you are going to lawyer up and file on their errors and omissions insurance as well as turn it over to their state regulatory and licensing board.

[jerp]

If the rollover was from a 401k to an IRA, the 401k administrator usually makes the check payable to the new IRA custodian, for benefit of the account holder. For example the check would be payable to "XYZ Securities as IRA custodian, fbo Joe Smith." That way the money is never in Joe Smith's possession so there is no taxable event. It sounds like the IRS doesnt think the $ landed in an IRA so the distribution is taxable. If you PM me some details I might be able to help.

[Triple 7]

If the rollover was from a 401k to an IRA, the 401k administrator usually makes the check payable to the new IRA custodian, for benefit of the account holder. For example the check would be payable to "XYZ Securities as IRA custodian, fbo Joe Smith." That way the money is never in Joe Smith's possession so there is no taxable event. It sounds like the IRS doesnt think the $ landed in an IRA so the distribution is taxable. If you PM me some details I might be able to help.

^^^ This^^^

Its a pretty simple process and shouldn't take much to straighten it out if the agent did it the wrong way.

[BeerMe]

Do yourself a favor and hire a professional. I was hit with a tax bill for selling stock OPTIONS and was taxed on the entire transaction, not the actual profit made.

For two years I haggled with IRS alone, and they withheld a refund. Wrapped it up easily paying TAX professional $100 bucks.

IRS actually paid me interest on the refund they withheld. Later that year I was sent a form displaying the taxes I owed on the interest they paid me. HA!

[txdukklr]

If the rollover was from a 401k to an IRA, the 401k administrator usually makes the check payable to the new IRA custodian, for benefit of the account holder. For example the check would be payable to "XYZ Securities as IRA custodian, fbo Joe Smith." That way the money is never in Joe Smith's possession so there is no taxable event. It sounds like the IRS doesnt think the $ landed in an IRA so the distribution is taxable. If you PM me some details I might be able to help.

^^^ This^^^

Its a pretty simple process and shouldn't take much to straighten it out if the agent did it the wrong way.

I'd think if he in fact rolled directly over the error shouldn't be difficult to fix

[jerp]

The only other thing I can think of is if he received the check directly and did not roll it into an IRA within 60 days. It would then be treated as ordinary income.

[Triple 7]

ask your agent for a form 5498 to show to the IRS. If they did it correctly, this should cover it.

[ItsLeo]

Same thing happened to us. We had to get the tax accountant who did our taxes to fix it.

[Burnadell]

The only other thing I can think of is if he received the check directly and did not roll it into an IRA within 60 days. It would then be treated as ordinary income.

I agree with this.

Your original explanantion is somewhat confusing and does not clearly explane the transfer/rollover and how it was conducted. The recipient firm should have sent a rollover form, signed by your father, to the holder of the IRA/401k that he rolled out of. Then the funds would have been sent from custodian to custodian as jerp mentioned.

If he simply withdrew the funds and bought the "product" outside of an IRA, he is SOL. If he withdrew the funds and deposited them into another IRA within 60 days and bought the product, then he needs the form 5498 as mentioned by Triple 7.

What is the "eligible" investment that he bought, and was it bought within an IRA account?

[hopedale]

Man, thanks you all. Lots of good information here.

It was difficult to get him to talk about it last night. One, as you can imagine, he is still pretty upset. Two, I'm they guy he used to change diapers on, so I think he doesn't want to talk to much about it with me.

Thanks again.

Jerp I'll shoot you a PM once I can get some more details.