Advice with how to proceed with the IRS on my procedure error in opening rollover IRA cd at my local bank
Simply stated, in my urgency to obtain a good rate to open an IRA CD, I did (2) direct distributions from
my IRA cash account direct by ACH, then a wire transfer, over a 3 day period, i.e. Thur and Fri, to my checking account. I found out on Friday morning after talking with my accountant that it should have been one wire handled thru my E*Trade Rollover dept but I did the 2nd transaction, again to the checking account so the bank could create the CD on Monday as the rate would be unavailable after Monday. I went in person to the bank on Monday afternoon and opened the IRA cd.
Bottom line is I forgot about the need to do this all as (1) transaction by E*Trade direct to the Bank.
I did the first transaction “after hours” on Thursday with no availability of E*Trade guidance, then had
to complete the total amount on Friday for a Monday delivery. At no time did I use or have any
involvement with the checking balance other than to have it held on Monday where I had left
instructions on what I intended to do. I don’t want to be penalized by the IRS. It was my error but I
did nothing with the funds other than deposit them. I’m really just asking how best to proceed with
my filing of taxes, reporting the rollover and not be penalized. My 1099-R form from E*Trade shows
the distribution as a “7” code.
Permalink Submitted by Alan - IRA critic on Wed, 2020-05-20 19:35
You are in violation of the one rollover rule in a one year period UNLESS your E trade statement shows that both distributions occurred on the same day, which I assume to be sometime in 2019. If not on the same date, the second distribution is taxable since it was not eligible for rollover, and it must be treated as an excess IRA contribution and removed from the IRA CD with allocated earnings. The IRS does not have the authority to waive the one rollover limitation. Check your statement for those distribution dates and post back.