IRA Distribution Made in Error by Firm
An IRA distribution was made when a sales assistant moved cash from an IRA to a Trust account to cover a debit in the trust account. An IRA distribution form was sent to the clientAND unfortunately signed by the client in error. The client is over 59 1/2 years old. Is it possible to restore the amount to the IRA?
Permalink Submitted by Alan Spross on Tue, 2009-05-26 18:11
Client is not eligible to do a 60 day rollover back into the IRA?
Permalink Submitted by Bruce Steiner on Tue, 2009-05-26 20:34
Even if the 60-day deadline has passed, the IRS has discretion to waive it under Section 408(d)(3)(I). We’ve gotten rulings from the IRS waiving the 60-day deadline. A helpful factor here is that it was the financial institution’s error.
There is one additional link in the chain. In addition to distributing the money from the IRA to the IRA owner, the money had to get from the IRA owner to the trust (in which presumably the IRA owner was a trustee or a beneficiary). Without more details, there’s no way to tell if this is a helpful factor.
Bruce Steiner, attorney
NYC
also admitted in NJ and FL
Permalink Submitted by Jose Morales on Fri, 2009-05-29 01:42
If the 60 days is not an issue then the client only needs to rollover the funds back to an IRA. If the client wants the distribution to be wiped clean, as if it never happened, and not generate a 1099R you will have to convince the Firm that somehow it was their error in withdrawing funds from an IRA account, even though they have a signed distribution form in their hands.
Permalink Submitted by Denise Appleby on Fri, 2009-05-29 12:51
That could be a tough one.
Thinking from the POV of the IRA compliance officer…one could understand if the financial institution says it is not (and cannot be) their error, because the IRA owner signed a distribution form; especially if the form had a ‘warning’ to the effect that if it is completed it would result in a distribution reportable to the IRS.
Permalink Submitted by Bruce Steiner on Sun, 2009-05-31 02:35
Denise raises a good point. The request for relief would be much stronger if the financial institution is willing to admit that it was their error.
What is the “trust account?” How do IRA funds get transferred to cover a debit balance in the account of a taxpayer other than the IRA owner?
A forum such as this can be useful for providing general information, but not for providing specific legal advice. The original poster’s client may wish to consult with his/her own attorneys, who can give her specific advice as to whether to seek relief from the IRS, or against the financial institution, or against the trustees of the trust, or against anyone else, based upon the particular facts (including the amount involved) and his/her objectives and risk tolerance.