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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3736
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Last June 23RD I initiated a roll over from an investment IRA

Resolved Question:

Last June 23RD I initiated a roll over from an investment IRA to a bank.

This still has not been finalized.

I am receiving a run around from the bank. First they mailed an improper mailing address.
Then they never received the check. A stop payment was issued.

Now I am hearing they have the check, but the systems are down until Tuesday and they cannot print out the paperwork for me to sign.

My question is this: the bank has the check, Made out to them, my name also.

They are pushing a money market savings plan.

I feel they may possibly be using my money without putting it into my account.

Can I go there tomorrow, request the roll over be cancelled, have them cash the check and put it into a savings account. How would this affect the tax? Do I get a statement at the end of the year?
Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

NPVAdvisor :

Hi,

NPVAdvisor :

Although this really is ridiculous (in terms of the banks screw-ups) I really don't think they're trying to use the money ... that would not only be a federal offence (theft by conversion) , but a breach of IRS (Tax law) as well ... they're probably touting the money market because its safe, there won't be any charges if you move it into some other fund or investmentm etc

NPVAdvisor :

If you actually stop the rollover and cash the check, the you would be distributing it from the IRA, which will cause all of the money to be taxed AND penalized an additional 10% as well (if you are under age 59 and 1/2) ... by keeping it as a rollover (keeping it inside the IRA shell, so to speak) you are keeping it sheltered from taxes and penalties

NPVAdvisor :

Once the rollover completes then you'll have whatever choices the bank offers for IRA's (CD's Mutual Funds. etc)

NPVAdvisor :

If you want the IRA invested in savings instead of the money market, I'm sure the will do that, but having a check made out to YOU, rather than to the IRA (for your benefit) ... makes it an IRA distribution, and that won't be pretty come January when you get that 1099 for doing your 2013 taxes .... For example if you are in the 25% tax bracket, you'll lose 35% of that to taxes (25% taxes plus the 10% early distribution penalty)

NPVAdvisor :

But to answer your question, you certainly can, It's your money... there'll just be a huge tax cost you DO have some options:

NPVAdvisor :

(1) Once its there immediately do a rollover to an institution ( another bank, a brokerage company, a mutual fund company) ... you can do one rollover per year without the taxes and penalties ... (2) Ask them to send the check back to the originating institution (cancel the rollover) ... (3) invest it differently WITHIN the IRA (IRA is just a form of ownership, It can hold money markets, CD's Savings Mutual Funds, a stock portfolio, etc)

NPVAdvisor :

Fidelity, Schwab, Scottrade and MANY others offer the same bank type products for their IRS bu thousands of other possibilities as well (and these folks deal with Rollovers all the time, you can do it all on line)

NPVAdvisor :

Here's an excellent article on IRA rollovers: http://www.mutualofamerica.com/lbp/retirement/retire_ira_004.html

NPVAdvisor :

And here's another provider (for a total of three, see Fidelity and Scottrade above): http://www.schwab.com/public/workplace/get_started/manage_your_plan/schwab_rollover_ira

NPVAdvisor :

Hope this helps

NPVAdvisor :

Let me know if you have any questions at all

NPVAdvisor :

Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3736
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 11 months ago.



Hi Jennifer,

... Just checking back in HERE, as I never saw you come into the chat.

Let me know if you have any questions at all

Lane
Expert:  Lane replied 11 months ago.

Thanks Jennifer,

If you'd like to work with ME again just say "For Lane only," at the beginning of your next question.


Thanks again,

Lane

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