Roth IRA transfer

Submitted by Ron Haragan on Wed, 2021-02-24 02:40

Back in 2004 I had a roth IRA that my financial advisor transferred from a US bank account to a Allstate Annuity, he stated to bet a better interest rate. He said he did a Roth to Roth transfer and has the paperwork for that. I basically did not nothing else with the account for many years assuming it was still a Roth account. In 2020, when I was 61, I made a total distribution from that account and when I received the 1099R it stated it was a traditional IRA and that I was responsible for paying taxes on the full amount. I had US bank call them and he told them it was a Roth to Roth transfer and he has the paperwork that states as such. The person was not very friendly and she was just saying it was a marked as a traditional IRA. I am assuming someone over at Allstate made and error. Since it was set up as a Roth and I have he paper work showing a such what are my options. I don’t want to pay taxes on a matter that was there fault..any suggestions.



Submitted by Alan - IRA critic on Wed, 2021-02-24 03:58

Even if you can prove this was all their fault, they are going to resist changing it and will say that you should have brought this to their attention shortly after it happened. You get a 5498 every year around May showing the type of IRA and the prior year end balance. You probably also get statements every once in awhile. Nonetheless, if you can get a copy of the US Bank paperwork and it is conclusive, you should send a copy to Allstate or if the amount is high enough to warrant legal help, have your lawyer send a letter and request that the 1099R be corrected to show a Roth distribution coded either T or Q in Box 7.  Apparently you did not intend to roll this distribution over?

Submitted by Ron Haragan on Wed, 2021-02-24 15:13

Thanks..this was opened at US Bank and I have the paperwoek that clearly states this was a Roth to Roth transfer. The bankser that opended the Roth is still working for US Bank and he is going to have me sign a letter and fax the transfer papework to Allstate. I was not involved in the transfer as I left this up to them to decided how to invest my money. I guess back than I was not really that involved in those matters. I did receive those 5498 but I guess I just assumed it was a a Roth as that is what I originally opended with US Bank. IF they don’t want to work with me do you think I can send a copy of my transfer and a explanation to the IRS explaining the situation???? The amount is not a whole lot 12000 dollars but that is money I would have to pay taxes on when I should not have to pay anything. It just seems since the mistake was both parties I should not be the one to brunt the consequences as it was not my decison to transfer the money to Allstate for a better rate, this was totally Us bank decision. 

Submitted by Alan - IRA critic on Wed, 2021-02-24 15:45

While it is helpful that US Bank is being cooperative, Allstate is the firm that must change their records retroactively for 17 years. All their 5498 forms would be invalid, and they would have to retitle the account as a Roth IRA and then issue a corrected 1099R. This type of account reconstitution can likely only be authorized by a few senior staff people, so you will have to elevate your request to that level. This could take considerable time, as I indicated above Allstate is likely to resist. Therefore you will probably have to file an extension and decide how much tax to pay with the extension request. I am not clear how the transfer was initiated, but as far as I know Allstate and USBank were totally independent of each other in 2004. Your advisor probably wanted to sell you an annuity, and was probably not licensed with US Bank, and therefore decided to transfer the account to Allstate. If the advisor is still licensed with Allstate you might see if the advisor knows who to take this up with at Allstate. If he isn’t interested, I would get another advisor. In short Allstate is the only firm that can make the necessary corrections to the account. If they do not, then your chances of success shrink since the IRS wants there issues to be resolved at the source, and to be sent the correct documents (corrected 1099R).
Please confirm that you never intended to roll over this distribution because if you did then this is also part of the required solution – to be able to maintain these funds in a Roth IRA.  Of course, if you didn’t it makes the solution somewhat simpler since the 60 day rollover deadline has probably passed.

Submitted by Ron Haragan on Wed, 2021-02-24 16:06

Actually I was not even involved in the decison to transfer my Roth IRA to allstate. This was done by the finacial advisor at US bank. He told me he did this because of the higher return with the annuity that they had at that time. He stated that it was just a Roth to Roth transfer from Us bank to Allstate. I realized I should have looked at those 5498 statements but since I assumed my investment was a ROTH I never put together that there was and error until I made a distribution and received the 1099R. I would think that both parties should have some responsibility with the error that was made,,,right????   I never instructed US bank to transfer the money to Allstate so I feel pretty upset and angry that I am being put in this position. In your opinion, if I send my documents with my return to the IRs with and explantion they will let me allow the distributuion to be tax free as a Roth??????  

Submitted by Alan - IRA critic on Wed, 2021-02-24 18:32

Depending on what your financial advisor was expected to do for you, he would be partially responsible for not following up to verify that the transfer was done correctly. However, only Allstate can fix the problem. You or the adivsor needs to request that Allstate reconstitute the IRA as a Roth IRA and correct the 1099R. Have you discussed this with the advisor? If the advisor has a relationship with Allstate (licensed life agent?) he may have more pull than you do, so should contact them first. If all of this fails, you could appeal to the IRS, but as I indicated, the IRS expects you to exhaust all other options to get this corrected at the source before contacting them. Expect that Allstate and USBank might blame each other here for the error depending on which firm originated the transfer.

Submitted by Ron Haragan on Thu, 2021-02-25 01:18

Thanks for the advice. I am doing just that. I am meeting my US Bank tomorrow and we are faxing the Roth to Roth transfer paperwork to allstate Complaint department for annuities. Per US Bank it clearly states this was only a Roth to Roth transfer and nothing more. I am even wondering if it is legal under IRS guidlines to even have a Roth changed a trad IRA with only a transfer of funds and not having is designated as a conversion??? But I will keep you informed what I find out.   I appreciate your advice.

Submitted by Ron Haragan on Sun, 2021-02-28 01:37

My US Bank financial advior faxed all the paperwork to Allsate. The transfer was done with paperwork sent from Allsate stating it was a Roth to Roth transfer. The thing is I have a copy of the transfer sheet they sent to US Bank which clearly says it was a Roth to Roth transfer and their acknolegmennt that they received the money and agreed to put such money in a Roth IRA with them. On fhe bottom of the form it states:  Please be advised that Allstate Life and Annunity  will accept the proceeds from your institution’s account referenced above to applied to:  and below it is marked ROTH IRA.     It was signed and dated.   This seems like clear proof they agreed to accpet the transfer to a Roth and not a trad IRA???

Submitted by Alan - IRA critic on Sun, 2021-02-28 04:20

I expect all they need to do now is figure out how they are going to reconstruct the account as a Roth IRA.

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