TIRA – Can a direct transfer to another custodian be characterized as a “Normal Distribution?”
I had a TIRA CD at a local bank that matured during 2014. I submitted a direct transfer request via another Credit Union to the bank with the maturing CD. The funds were directly transferred to the new custodian without me ever seeing any funds.
Today, I received an “IRA Statement of Account for Tax Year 2014” from the local bank where the CD matured. It shows a “Total Value January 01, 2014 $55,984.29 plus Year-to-Date Earnings $1250.30” Then it shows “Less Normal Distribution $57,234.59” resulting in a “Total Value December 31, 2014 of $0.00” “This information is being furnished to the Internal Revenue Service.”
Is the direct transfer of my IRA balance from the losing custodian to a gaining custodian correctly being characterized as a “normal distribution?” I ask because I have always understood a “normal distribution” to be a taxable event.
If this statement is incorrect, how do I proceed to make sure the correct information – a direct transfer – is furnished to the IRS.
Thanks for your clarification.
Permalink Submitted by Alan - IRA critic on Tue, 2015-01-13 00:57
Your concern is justified. For a direct transfer, there is no 1099R and nothing is reported to the IRS. You need to call them right away and straighten them out that there was NO distribution. If they continue to mishandle transfers in 2015, the results will be devastating under the new rollover rules because some taxpayers may not have a rollover available. You might also check with the new custodian to confirm the nature of the received funds. You do not want the new custodian to issue a 5498 either. 1099R forms are being prepared for mailing now so contact the old custodian ASAP to stop any 1099R processing. If it gets processed anyway, pressure them to rescind it.
Permalink Submitted by Genevieve Comfort on Tue, 2015-01-13 01:12
Thank you Alan. I’ll contact that bank tomorrow.