Error with Roth Conversion
A client’s investment advisor was trying to do a Roth IRA conversion from their traditional IRA. The advisor made an error and converted too much.
He contacted the IRA administrator immediately, but they said there was nothing they could do.
I can’t find any potential solution, other than perhaps trying to request a PLR, which is a time consuming and expensive process.
Permalink Submitted by Alan - IRA critic on Wed, 2021-01-27 20:45
I am not aware of any easy solution, other than an Errors and Omissions insurance policy for the advisor if they are even available. How is “too much” defined? By the client’s instructions, by the tax impact of the converted amount, or by the investment results of the assets were converted or purchased with the conversion money? Some of these conversion mistakes turn out pretty well for taxpayers in the long run, but at any given point in time the conversion may look brilliant and a little later like a disaster. Therefore, it is a very subjective process to determine the actual damages in such a situation. Of course, individual investors without advisors are also making such errors such as confusing dollars converted with the number of shares.