inherited non-spousal IRA-management fee
Merrill Lynch charged me a $100 annual fee for an inherited non-spousal IRA account. I paid this from my checking account. Subsequently, I spoke to a representative about another matter and happened to mention my displeasure with the annual fee, especially since Vanguard and Fidelity do not charge fees for my other IRA accounts. He said I should not have been charged and reversed the charge. So far so good. That $100 is sitting there separate and apart from my investment. Now I’d like it returned to me, but have been advised that this will count as a distribution and will be taxed. Seems to me since I paid a charge with pre-taxed dollars I should not have that money taxed again. Any thoughts?
Permalink Submitted by Alan Spross on Sun, 2011-01-02 23:33
Sounds like whoever handled the correction of the fee thought that it had been debited from the IRA. ML needs to pull the $100 back out of the IRA (and NOT as a taxable distribution) and cut you a check for you to reimburse your taxable account. There should be no info return from ML on the IRA for any distribution and of course a contribution is not allowed.
You are correct, that allowing ML to proceed with this will result in double taxation. Hopefully, they will recognize their error without any problems.
Permalink Submitted by barbara rosen on Sun, 2011-02-06 20:46
I’m responding to my own original post and reply. I hope you can see both.
Despite the good advice you offered and my careful, patient request to Merrill Lynch (ML) to return the annual fees (turns out there were two fees of $100 each) for my inherited-IRA which I paid for with personal checks (not with funds from my IRA), without it being considering a distribution, I have been told by various departments within ML:
Yes,they would code it so that it didn’t count as a distribution from my IRA.
No, they could not do so.
Then, I was told the tax would be minimal on $200* distribution and I should just pay it.
This is frustrating and now a matter of principle. When ML waived the annual fee after I paid it, they should have returned it to me. Instead they put it into the IRA. Do you think my next step toward resolving this is to write to ML (compliance department, operations or CEO).
Thank you for considering this. If my original post and reply are not showing, please advise and I’ll re-post.
Permalink Submitted by Alan Spross on Sun, 2011-02-06 23:20
Yes, I would appeal this to a higher level as long as you are willing to put in the time it will take.
Note that their $100 ($200?) contribution to your inherited IRA is technically a regular contribution and an inherited non spouse TIRA cannot receive a contribution, although the IRS will not know about the contribution unless ML reports it as such. They could easily remove it from the IRA as a fee correction and refund it to you and not report it as a distribution. This will not result in an IRS issue since they are simply correcting their own error in making a disallowed contribution, and an error that you did NOT contribute to.