A prospect brought in a check for $19,300 representing a distribution from an Indexed Annuity after paying an 8% surrender charge. The check stated that it was to be deposited within 90-days or would be voided, so the gentleman was eager to deposit it quickly, and did so into a bank checking account (non-IRA). This deposit was made on the 46th day after the date of the letter that was included with the check disbursement. Later, on the 78th day following the letter date, the prospect came back with a thick envelope containing all his various account records and it was discovered that the Annuity was actually an IRA.
The prospect is age 62 – not financially sophisticated or experienced – and had no awareness that his annuity was specifically an IRA (or anything else, for that matter). Additionally, he is a Vietnam Veteran suffering from PTSD, is disabled, and undergoes psychiatric counseling and medication.
The question is: would an IRS waiver of the 60-day rollover rule be likely granted in this case given that the intention was clearly to place the money into a financial institution, and that confusion surrounding the account status (ie IRA) – reasonably stemming from impairments – resulted in the error made in going into a non-IRA account?
Moreover, if a waiver is issued, should a substitute account (IRA) simply be establised and the funds moved into it? and how would the procedure follow for correcting the 1099-R when tax time comes?
With thanks in advance for your reply.