Forgot RMD plus maybe did too many rollovers – help

Submitted by Gary Townsend on Sun, 2011-01-30 20:32

Hi,

I found this site Googling, and I’m hoping someone can help me figure out what to do. I am a CPA, but by no means an expert on IRAs. I’ve been assisting my elderly mother who is now terminally ill with her finances since my father passed away in 2008. We managed to get all of the RMDs done for 2008 and she assumed his IRAs as owner as is allowed for spouses. 2009 was a breeze since we didn’t need an RMD. On to the mess I have for 2010.

I managed to move all accounts to two custodians by doing one rollover in 2008 and doing the rest via direct transfers, so I have no issues with what I did prior to this year. In 2010 my Mother got mad at one of the custodians (say custodian A) and closed the account she had there. There was one IRA, and within it there were two CD’s. One for about $22k and one for about $5k. They apparently gave her two checks, as she took the one for $5k to a new custodian (say custodian B) and opened an IRA with the $5k as a rollover. She took the one for $22k to the existing custodian (say custodian C) where her other account was and and got another CD in her IRA, also as a rollover contribution. I just received the 1099 from custodian A showing the sum ($27k) as a distribution.

To add insult to injury, her health declined severely in Q4 and I forgot to take her RMD. The calculated RMD for 2010 is $7,500. I’m trying to figure out what to do to minimize the tax burden as she is already underpaid for this year.

Initially, my thought was to take the 2010 amount immediately and then request the IRS waive the penalty and explain the circumstances. The explanation would also indicate that she would also take the 2011 RMD in 2011. As I thought about it more, I thought of the following:

Is there any way I can ‘un do’ the $5k rollover and then have it count towards the RMD for 2010? That would make things much simpler. (It’s at a local bank, and I’ve found the bank folks to not be up on IRA rules, so I need to know specifically what I want to do before I get there.) I could then either take the remaining from Custodian C ASAP and ask for a waiver on the smaller penalty amount, or just suck it up and pay the penalty on the remaining shortfall on the RMD.

Any other ideas that straighten this out? I’d really appreciate any help or ideas as I need to get her return done ASAP.

Thanks,

Gary



Submitted by Peter Lingane on Sun, 2011-01-30 22:30

One cannot roll over a required distribution. My interpretation of the events that you describe is that your mother did not fail to take her 2010 RMD; rather, she made an excess contribution equal to the amount of her 2010 RMD. If the excess contribution is withdrawn before the due date of her tax return, including extensions, the 6% excise tax will not apply. See Pub 590 or Choate for details.

The bank may have considered your mother’s CDs as separate IRAs. If this is the case, then your mother received one distribution from each of two IRAs and did not violate the 12-month rollover rule. She did not violate the 12-month rule simply because the bank wrote two checks; she rolled a single distribution in part to one custodian and in part to another. However, she probably violated the 12-month rule if your mother asked the bank to delay the checks until the CDs matured. You need to find out the reason for two checks.

A second rollover within 12 months would be taxable. It would also be an excess contribution and must be withdrawn before the due date of her tax return, including extensions.



Submitted by Gary Townsend on Sun, 2011-01-30 23:16

A few things to clarify.

The only reason I can see for the two checks was that there were two CD’s within her IRA. In looking at her statement, she received one statement for one IRA “plan” (per the statement). Within that “plan” there were two CD’s. Both checks were drawn on the same day and each was for the exact amount in one of the two CDs. I suspect this was a bank thing as they closed two CD’s and did two checks. On that very same day she went to Custodian B and C and did rollover contributions of each of the two checks.

As things look on her yearend statements, Custodian A is reporting a $27k distribution, Custodian B is reporting a $5k rollover contribution and Custodian C is reporting a $22k rollover contribution. There are no problems with the 60-day rule as she did everything on the same day, and per your response it appears she did not make two rollovers this year. Unfortunately, as of 12/31/2010 no specific withdrawal was made to meet the RMD for 2010 as we stand right now.

What I’d like to do is request back part or all of the amounts custodian B and C deposited as an excess contribution, and then use that to meet her RMD for 2010. I’d like to know if that is possible. Since the receiving banks treated this as a “rollover” per their records, I am unsure whether I can get part of it back as an excess contribution.

Thanks,

Gary



Submitted by Alan Spross on Mon, 2011-01-31 00:15

Peter’s analysis is correct. The first distribution in 2010 is deemed to apply to the 2010 RMD, and therefore there is an excess contribution to correct.

Since there is only one actual distribution despite the two checks, the excess of the RMD amount can remain as rollover contributions. I recommend the following procedure:

1) Immediately go to custodian C and explain that an excess contribution of 7,500 has been made to the IRA because that amount was her RMD. They will calculate the earnings and issue a check. There will be a statement showing the earnings amount and that amount will be taxable in addition to the RMD on the 2010 1040.

2) Reporting all this on the 2010 return should include an explanatory statement because reporting the taxable income for the RMD plus the earnings on the excess contribution will not match the 5498 reporting a rollover contribution. The 7,500 RMD plus the earnings will be taxable income on line 15b, but “rollover” will still be entered next to 15b for the portion that was rollover eligible. The statement should explain that the RMD was rolled over in error and distributed in 2011 as an excess regular contribution and show also list the amount of earnings that is taxable. If these were also CDs, there will be bank withdrawal early withdrawal penalties to complicate the reporting somewhat; they would be adjustments to income on the 2011 return.

All in all, fairly painless since there are no penalties here and no loss of IRA funds in addition to the RMD with the exception of a very small amount of earnings.

Using only CDs when subject to RMDs can complicate matters; probably a good idea to keep the RMD amounts in a savings or MM account, at least after CDs start to pay something meaningful.



Submitted by Gary Townsend on Fri, 2011-03-04 16:52

I wanted to thank everyone for their assistance, and also follow up with what has transpired.

I went to Custodian C and filled out the paperwork to get a $7,500 excess contribution back. Their IRA department spit it back out saying you cannot get an excess contribution refunded from a rollover. I read through Pub 590, and I only see this as an option due to “incorrect rollover information” from “the plan.” I’m looking at the last paragraph on page 49 of the 2010 Pub 590. I’m not sure if this would apply or not, as I’m not sure my Mom was given incorrect information by anyone (but I’m willing to say she was if it gets me where I need to be). This may not even apply to my situation – it was just the only thing I saw in the pub that came close to where I am.

Just to possibly complicate things, my Mom passed away about 3 weeks ago. I still have the form she completed before passing that the bank wouldn’t accept. I was wondering if someone had specific guidance I could show to Custodian C to get them to actually process the return of the excess contribution. I know what to do on her tax return if I get them to do it – I just need some help getting them to actually do it.

If I can’t get that to work, I took a distribution for her in January before she passed away that would cover the 2010 one she didn’t take. My plan was to note we had corrected the under distribution for 2010 in January 2011 and request the penalty be waived when I file her tax return next month. If I don’t hear back from them by later this year that they are denying that request, I was then going to take another distribution this year to cover her for 2011. After that my brother and I will then have the bank transfer the IRA to an an inherited IRA for each of us as we are the beneficiaries.

Any assistance or thoughts on the above would be greatly appreciated.

Thanks,

Gary



Submitted by Alan Spross on Fri, 2011-03-04 18:00

Sorry to hear of your loss.

Custodian C is incorrect.
Ref: Pub 590, p 33 – “Distributions not eligible for rollover” This is one of many references to RMDs not being rollover eligible
Ref: Pub 590, p 48 – “Excess Contributions” See last paragraph – “Excess contribution can be the result of……………or an improper rollover contribution”. This more directly describes the situation than the “incorrect rollover information” paragraph on p 49. That one is for rollovers from employer plans. But improper rollovers can occur for a variety of reasons and they are corrected as if they were excess REGULAR contributions. There is no separate procedure for correcting improper rollovers.

In any event, the custodian is incorrect that they cannot correct a timely excess contribution from a rollover. It would be interesting to see what they would propose for your to correct this since they probably agree that an RMD cannot be rolled over, and may also understand that the first distribution from an IRA in an RMD distribution year is deemed to apply to the RMD. In any event, a taxpayer could make an excess regular contribution to IRA A and roll it over to IRA B, and IRA B would then have to distribute the correction since IRA A no longer exists. So stick to it and perhaps they will take a look at Pub 590. The same wording is in the 2009 590 one page away from the 2010 if they do not have a 2010 yet.

Other than that, on the 2010 return attach the 5329 requesting the penalty waiver. The IRS will be sure to grant it given that she was critically ill. You will have to repeat that process for 2011 the 2011 RMD on her final 2011 1040 and 5329. And you and your brother should take out the 2011 RMD before year end. Probably best to do it when you retitle the IRA before establishing separate accounts. You are correct in mentioning the transfer because you cannot do an indirect rollover of a non spouse beneficiary IRA and it would trigger a taxable distribution that is irreversible.



Submitted by Gary Townsend on Sun, 2011-03-06 03:19

Thanks for the additional help and the pointers to the pertinent sections of Pub 590. I am going to follow up with the custodian and try and get the refund again before I file her tax return. I may even pay the taxes due and file an extension just so I have more time to chase after them (although they have been pretty speedy with their replies thus far).

Thanks again,

Gary



Submitted by Gary Townsend on Fri, 2011-04-15 20:33

I thought I would just post a follow up and let everyone who replied to my request know how things ended up.

I have beat on this custodian relentlessly, but they would not budge from their belief that I could not correct this before filing my Mom’s tax return. I finally told them they had to put it in writing, because as executor of my Mom’s estate I wanted something from them stating that they believed this was incorrect. I also told them I thought it was odd they believed it was ok to just toss this written request and respond with a phone call, with nothing in writing whatsoever on their side. This excess contribution refund request was made before my Mom’s death, so they drafted a letter to me as her POA and provided it to me today. In it they stated:

“Unfortunately, we cannot fulfill her request at this time as it was not a contribution deposit for 2010 but a rollover from another IRA, which cannot be categorized as an excess contribution.”

I made them do this primarily because if my Mom’s return is audited and the IRS says otherwise, I am going to go back after the bank for any fine or penalty we suffer because of their error. If I am the one who is wrong I will be no worse off than I am now.

So on this year’s return I will request the waiver of the penalty for her oversight in not taking an RMD, noting that it was corrected in early 2011. I immediately took the 2010 RMD amount in early 2011 in preparation for this. Hopefully they will waive the penalty. I am not going to transfer this to an inherited IRA in my name until later in this year because I will still need to do an RMD for 2011 (the year of my Mom’s death). If the IRS denies my waiver of the penalty I plan on using the amount already taken as the 2011 RMD and then transferring this to an inherited IRA. I will then promptly move this to another custodian (by doing a custodian to custodian transfer for sure! I won’t be silly enough to have someone give me a check in my name after all this).

Thanks everyone for all your assistance.

Best regards,

Gary



Submitted by Alan Spross on Sat, 2011-04-16 00:38

Did you file the 2010 return or extend it?

You may have missed the earlier points made that actually your Mom DID take out her 2010 RMD since the first distribution in any year is deemed to apply to the RMD. That RMD amount should be reported as taxable income on her 2010 return. The error was that it was rolled over and created an excess contribution that needs to be corrected. Your distribution in 2011 will apply to the 2011 RMD, but you will not be able to file her final 2011 return for several more months.

With respect to the inherited IRA at the incompetent custodian, you should file the death certificate and have it re titled properly as an inherited IRA. Then do a trustee to trustee transfer to another custodian. probably a larger one that knows what they are doing. If you have your own IRAs, perhaps transferring to that custodian would be appropriate. You do not have to take your first RMD until 12/31/2012. But technically, a 2010 excess contribution still resides in this IRA and can only be distributed to you if and when you decide to remove those funds.

Because of the odd chronology of circumstances here including the change of registration, there is a good chance the IRS may never figure out what happened or should have happened. Therefore, probably your best bet now is just to remove the funds that are excess contributions even if the custodians refuse the code the distribution as a corrective distribution. Worst case here is that the IRS charges a 6% excise tax for the excess contribution for 2010, but the chances of this are slim given your Mom’s death. Sometimes the IRS gets as lost as some of these custodians do with their own rules.

Finally, your last paragraph contains a plan you cannot do ie transfer the 2011 RMD or any other distribution you take to an inherited IRA. You cannot make a contribution to an inherited non spouse IRA and none of the distributions taken after her death are eligible for rollover. They all must be reported under your SSN, and that is why you should have the IRA retitled ASAP to prevent a further compounding of errors. Then do a direct transfer to a better custodian. You already know that you cannot do any indirect rollovers of a non spouse inherited IRA.

Good luck. Sometimes there is no easy way out of these messes and having a bad custodian can result in snowballing of errors that you cannot get out ahead of.



Submitted by Gary Townsend on Sat, 2011-04-16 01:04

[quote=”[email protected]“]Did you file the 2010 return or extend it?[/quote]

Have not filed yet. Was planning on doing that this weekend.

[quote=”[email protected]“]You may have missed the earlier points made that actually your Mom DID take out her 2010 RMD since the first distribution in any year is deemed to apply to the RMD. That RMD amount should be reported as taxable income on her 2010 return. The error was that it was rolled over and created an excess contribution that needs to be corrected. Your distribution in 2011 will apply to the 2011 RMD, but you will not be able to file her final 2011 return for several more months.[/quote]

I did notice that, but since the custodian refused (in writing) to refund it I figured I was screwed. I was going to put the entire distribution on her return as a rollover and then indicate she did not take her RMD and ask for the penalty to be waived as a distribution was taken in January 2011 to fix that. I intended to take another distribution in 2011 as her regular RMD before making it an inherited IRA, since my Mom passed away in 2011 and is required to take an RMD in 2011 (so there would be a catch up to correct not taking an RMD in 2010 since I was reporting the entire amount as a rollover and then her regular RMD for 2011, the year she passed away). The first distribution in 2011 was mean to be my “corrective action” to rectify the under distribution situation. I realize this contradicts what you said above, it was just my approach to resolving it since the custodian wouldn’t refund the excess contribution.

[quote=”[email protected]“]With respect to the inherited IRA at the incompetent custodian, you should file the death certificate and have it re titled properly as an inherited IRA. Then do a trustee to trustee transfer to another custodian. probably a larger one that knows what they are doing. If you have your own IRAs, perhaps transferring to that custodian would be appropriate. You do not have to take your first RMD until 12/31/2012. But technically, a 2010 excess contribution still resides in this IRA and can only be distributed to you if and when you decide to remove those funds.[/quote]

I have IRAs for my wife and myself at Vanguard. You lost me a bit here, so forgive me. You say a 2010 excess contribution resides in this IRA and can only be distributed to me (if I switch it to an inherited IRA). What about the RMD that needs to happen under my Mom’s SS# in the year of her death, or were you assuming the distribution I did just before her death covered that, and there was still the excess contribution from 2010 in the IRA? If I switch to an inherited IRA, and then remove the excess contribution, wouldn’t it come to me and be taxable on my return? (Not what I’d like since my tax bracket is WAY higher than Mom’s).

[quote=”[email protected]“]Because of the odd chronology of circumstances here including the change of registration, there is a good chance the IRS may never figure out what happened or should have happened. Therefore, probably your best bet now is just to remove the funds that are excess contributions even if the custodians refuse the code the distribution as a corrective distribution. Worst case here is that the IRS charges a 6% excise tax for the excess contribution for 2010, but the chances of this are slim given your Mom’s death. Sometimes the IRS gets as lost as some of these custodians do with their own rules.[/quote]

Hadn’t thought of this. Now I’m thinking I should just extend Mom’s return (paying taxes that are due with the extension of course), and then get another distribution from the custodian ASAP, which would remove the excess contribution even if it is not coded that way by them. I can then have them set this up as an inherited IRAs (50% me, 50% my brother), and be done with them. The 6% penalty is way more palatable than the 50% one if it came to that. It also makes it simpler since the IRA is going to be split between my brother and I. Am I thinking correctly?

[quote=”[email protected]“]Finally, your last paragraph contains a plan you cannot do ie transfer the 2011 RMD or any other distribution you take to an inherited IRA. You cannot make a contribution to an inherited non spouse IRA and none of the distributions taken after her death are eligible for rollover. They all must be reported under your SSN, and that is why you should have the IRA retitled ASAP to prevent a further compounding of errors. Then do a direct transfer to a better custodian. You already know that you cannot do any indirect rollovers of a non spouse inherited IRA.[/quote]

Bad wording on my part. I meant take the 2011 RMD and then transfer what is LEFT in the IRA to an inherited IRA. I do realize I can’t contribute these distributions to another IRA – I just wasn’t clear when I said what I was going to do…thanks for the warning, nonetheless.

I do appreciate your time reading my posts and responding. If you could answer my last few questions above I think I can formulate my plan and move forward. Can’t wait to be rid of this bank and with Vanguard with these assets. The woman I’m dealing with is nice enough and was always great to my parents, but the bank’s IRA department is giving me fits.

Thanks again,

Gary



Submitted by Alan Spross on Sat, 2011-04-16 02:40

Gary,
>>>>>>>>
What about the RMD that needs to happen under my Mom’s SS# in the year of her death, or were you assuming the distribution I did just before her death covered that, and there was still the excess contribution from 2010 in the IRA? If I switch to an inherited IRA, and then remove the excess contribution, wouldn’t it come to me and be taxable on my return? (Not what I’d like since my tax bracket is WAY higher than Mom’s).
>>>>>>>

Yes to both questions. The first distribution taken in 2011 would be applied to the 2011 RMD until that RMD was satisfied. Earlier you indicated that you took out the 2010 RMD in 2011, but she took out the 2010 RMD OK in 2010, just erred in rolling it over. So the distribution taken prior to her death in 2011 was deemed to apply to her 2011 RMD. Obviously, since you used the 2010 amount, that RMD is probably short of the actual 2011 or somewhat more than the 2011 RMD. If short, you can just take out the balance sometime prior to year end.

No distribution can come out of the IRA now unless it is paid to the beneficiaries. Don’t hold back her death info because if they make a distribution to her, your POA is no longer any good and then you will have the funds added to her probate estate. So after the IRA is propertly titled, the distribution will be made to you and your brother with 50% taxable on your 2011 returns. Nothing can be done with your tax bracket being higher than your Mom. Her final return can only include income received before her death.
You and your brother can also establish separate accounts before or after any 2011 distributions and you can transfer your share to VG and your brother to wherever he wants. You have until 12/31/2012 to establish separate inherited IRA accounts that will allow each of you to use your own life expectancy for your RMDs. If you miss that deadline, the life expectancy of the oldest will apply to both of you.

>>>>>>>>>>>>>
Hadn’t thought of this. Now I’m thinking I should just extend Mom’s return (paying taxes that are due with the extension of course), and then get another distribution from the custodian ASAP, which would remove the excess contribution even if it is not coded that way by them. I can then have them set this up as an inherited IRAs (50% me, 50% my brother), and be done with them. The 6% penalty is way more palatable than the 50% one if it came to that. It also makes it simpler since the IRA is going to be split between my brother and I. Am I thinking correctly?
>>>>>>>>>>>>>

It would remove the excess contribution, but since it would be coded as a normal distribution, it would not eliminate the 6% excise tax for 2010, but would prevent it from occurring again for 2011. Any distributions you take post death apply in this order: 1) To her 2011 RMD, but you took that already 2) To the excess contribution. Each dollar distributed can only apply to one of these requirements, in other words you couldn’t double up. Regarding the 2010 return – yes at this late date, it should probably be extended. The 2010 RMD should be reported on that return, with only the excess of that RMD shown as a rollover. The RMD would be taxable, the rollover would not. I would NOT report the 6% excess contribution penalty on that return and if the IRS ever inquires about it (unlikely) then you can show them your efforts with this custodian and they will probably waive the that penalty. There should be NO exposure to the 50% excess accumulation penalty because the 2010 RMD was deemed distributed.



Submitted by Gary Townsend on Sun, 2011-04-17 00:08

Hi again Alan,

I really do appreciate your assistance with this. Since I am not of retirement age yet all my experience with IRAs thus far has been on the contribution side. I have had to do a lot of reading to bone up on the distribution side since my Dad passed away in 2008. I am amazed at the complications that can arise if you make a mistake and how easy it is to actually make a mistake.

Based on the above I am going to finish my Mom’s tax return and file it tomorrow. I have everything entered in the software already…I just need to fix the IRA distribution so that the required RMD for 2011 is not included in the rollover amount. I am not going to fuss with reporting the excess contribution as you suggested. If they catch up with me I will provide my letter showing I tried to fix it and I believe they will waive the penalty as you suggested they might. I guess I will end up paying taxes on that amount twice (once this year for her and again when I eventually withdraw it), but given some of the circumstances I’ve seen others post on this board I think I’m getting off pretty easily (I suppose I could track this as a non-deducted contribution that would not be taxable upon withdrawal, but I’m guessing that would require me to report the excess contribution and pay the 6%, right?)

One thing you posted that I wanted to ask for a little clarification on is the requirement to take an RMD in the year of death. I had always assumed that had to be done under the SS# of the deceased and reported on their last tax return. I assumed the check would be made payable to the estate and would need to be probated. From what you said above, it sounds like it could instead be done by the beneficiary and reported on their return. Is that correct? In essence, it doesn’t matter who takes one, as long as one gets taken? So if the deceased didn’t do it before they died the beneficiary would need to take one in the year that the owner died, correct? I realize I have already taken one for 2011 so my brother and I will not need to take one now until 2012….I am just curious if my understanding of your post is correct. (And FYI, I took the 2011 before my Mom passed, which was a little higher than the 2010 amount – just in case things ended up working out just like they did here).

Thanks again for all your assistance.

Best regards,

Gary



Submitted by Bruce Steiner on Sun, 2011-04-17 00:20

Upon the IRA owner’s death, the IRA then belongs to the beneficiaries. If the IRA owner dies before taking his/her required distribution for the year of death, the beneficiaries then take what would have been the IRA owner’s required distribution for that year. It cannot be paid to the IRA owner’s estate (unless the IRA is payable to the IRA owner’s estate).

You don’t probate a check. You probate the decedent’s Will. In most cases, probating a Will is not difficult, expensive or burdensome. It’s a very small part of the work involved in an estate administration. The more difficult work involves the estate tax returns, the tax planning, and deciding how to deal with the assets (for example, the IRA in this case) and the beneficiaries.



Submitted by Gary Townsend on Thu, 2011-04-21 00:31

I went to this custodian with my brother today to have this IRA split into two inherited IRAs. As I was waiting I was reading their custodial agreement, and noted it stated the following in the disclosure statement:

[b]8. No Rollovers of RMDs.[/b] An RMD must be satisfied before you can roll over any portion of your IRA account balance. The first distributions made during a year will be considered RMDs and can be satisfied through aggregation with your other traditional IRAs or SIMPLE IRAs. Any RMD that is rolled over will be fully taxable and considered an excess contribution until corrected.

I just about fell out of my chair when I read this, as they had been arguing with me all along that a rollover cannot be an excess contribution. Yet here it is in their very own document. After sufficiently beating the branch manager over the head with this for about 5 minutes I told her there was no way I was doing the paperwork to transfer this IRA to an inherited IRA until I got on the phone with their “IRA expert” who has been telling me I was wrong all this time.

I still have the document my Mom signed before she died asking for the refund of this excess contribution. My questions are:

1. Can they process this request now? It was signed by my Mother a week before her death.
2. If they will not process the original request from #1 above, can [b]I[/b] request return of this excess contribution before or after transferring this to an inherited IRA?
3. If I cannot get #1 and #2 done with them, can I request a refund of this excess contribution AFTER doing a custodian to custodian transfer of the inherited IRA to a new custodian?

This really burned my biscuit when I read the above text which so clearly covers my Mom’s situation. It could have all been solved easily before her death if they had just read their own custodial agreement. Doh!

Thanks,

Gary



Submitted by Alan Spross on Thu, 2011-04-21 01:18

1) Very tough question with several spinoff issues – eg most IRA agreements state they are not bound by a request until it is accepted by the bank. Due to their own incompetence, they never accepted this request. You probably want to force them to calculate the excess contribution distribution and do the earnings allocation retroactively to when they would have if they knew the IRS rules, and make the check payable to your mother, and then you could report it on her final return. You can try this, but don’t know it is worth an extended battle, especially if they are willing to to the calculation now and code this as an excess contribution correction, but payable to you and your brother. The obvious difference is whose return the income is on.

2) You certainly have legal right to the funds once you file the death Certificate and have the account re titled in your names. The debate then would be whether they will code it as an excess contribution correction which would be taxable in 2010 since that is when the RMD was rolled over.

3) Yes, but you might just be transferring the battle to the new custodian. Few custodians have ever been asked to process an excess contribution corrective distribution to a beneficiary, and the IRS has not put out specific rules dealing with that. You certainly would not be able to get a new custodian to make the check out to your mother to get the income on her final return.

This is why I suggested that you just take out the excess contribution in addition to any shortfall in the 2011 RMD because you originally used the 2010 RMD amount. Don’t know that there is a shortfall, you might have taken out more because that adjustment is based on the 12/31/2010 balance and your mother’s 2011 age. The IRS will never understand this chronology of events including the custodian screw up and what you have done will be good enough for them. I would not even hold out for the excess distribution coding, which would be nice if you can get it, but not worth fighting over.



Submitted by Gary Townsend on Thu, 2011-04-21 01:23

[quote=”[email protected]“]1) Very tough question with several spinoff issues – eg most IRA agreements state they are not bound by a request until it is accepted by the bank. Due to their own incompetence, they never accepted this request.[/quote]

Interestingly enough, they signed the request and then returned it to me because they weren’t going to do it! So the version I have from them has their signature on it, dated before my Mother’s death. I can’t wait to be rid of these people.



Submitted by Alan Spross on Thu, 2011-04-21 01:28

Good news is their agreement was correct. Bad news is they did not understand their own agreement. That provision is or should be part of everyone’s IRA agreement.



Submitted by Gary Townsend on Mon, 2011-04-25 22:59

Well, they came back to me today and told me they will indeed refund the excess contribution, and it will be coded as such. I refused to sign the paperwork for the inherited IRA until I spoke with a manager in their IRA department. I never did talk to a manager, but the supervisor in the IRA department apparently called someone they knew at the IRS and confirmed my request was correct and should be honored (not sure why they didn’t think their custodial agreement was accurate). Good thing I included this amount on my Mom’s tax return for 2010. Now I will just need to amend it to include the earnings on the excess that is being refunded.

Thanks again everyone for your assistance.

Best regards,

Gary



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