Fidelity categorically refuses to use Q for Roth distributions

Discussion in 'Financial Planning' started by Rich Carreiro, Jan 25, 2012.

  1. (More of a tax thing, admittedly, but since some of you
    may deal with your clients' tax stuff as well, I thought
    this might be of interest here.)

    (Background - my mother made a qualified Roth distribution
    that Fidelity could unilaterally determine was qualified -- she
    is over age 59.5 (and they have her DOB) and the Roth account
    had been at Fidelity for more than 5 years, so they know the
    five-year holding period is satisfied. Yet they coded
    the 1099-R with a "T" instead of a "Q". I realize that's
    not a huge deal since she has the backup she needs if the IRS
    ever challenges the status of the distribution, but it's
    still somewhat annoying.)

    (This is Fidelity's response to my mother's question about this)

    I do understand your point of view to use code "Q" on your Roth
    IRA 1099-R.

    The following is from the 2011 Instructions for Forms 1099-R and
    5498:

    Use Code Q for a distribution from a Roth IRA if you know that the
    participant meets the 5-year holding period and:
    * The participant has reached age 59 1/2,
    * The participant died, or
    * The participant is disabled.
    Note: If any other code, such as 8 or P, applies, use Code J.

    Use Code T for a distribution from a Roth IRA if you do not know
    if the 5-year holding period has been met but:
    * The participant has reached age 59 1/2,
    * The participant died, or
    * The participant is disabled.
    Note: If any other code, such as 8 or P, applies, use Code J.

    As you can see from above, the IRS Tax Reporting Guidelines do
    offer financial institutions the flexibility to use Code Q or T
    for Roth IRA distributions. Code Q puts the burden of proof on
    financial institution to determine if the distribution is
    qualified or not. Therefore, we have decided to use Code T for all
    post age 59 1/2 Roth IRA distributions.

    _There are no instances where we will issue a Roth IRA 1099-R with
    a Code Q._

    While I know that not all investors will necessarily agree with
    our position, I do hope you understand why we choose this option.

    --
    Rich Carreiro
     
    Rich Carreiro, Jan 25, 2012
    #1
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  2. Rich Carreiro

    Gary Guest

    Rich:

    Fidelity's answer was indefensible. Your mother's Roth was at
    Fidelity for more than 5 years, and she was older than 59 1/2.
    After reading the instructions, how could anyone conclude that
    anything but code "Q" is appropriate? IMHO, they are not
    properly serving their customers and they don't deserve your
    mother's account or mine!


    On 2012-01-25 15:25:22 +0000, Rich Carreiro said:

    > (More of a tax thing, admittedly, but since some of you
    > may deal with your clients' tax stuff as well, I thought
    > this might be of interest here.)
    >
    > (Background - my mother made a qualified Roth distribution
    > that Fidelity could unilaterally determine was qualified -- she
    > is over age 59.5 (and they have her DOB) and the Roth account
    > had been at Fidelity for more than 5 years, so they know the
    > five-year holding period is satisfied. Yet they coded
    > the 1099-R with a "T" instead of a "Q". I realize that's
    > not a huge deal since she has the backup she needs if the IRS
    > ever challenges the status of the distribution, but it's
    > still somewhat annoying.)
    >
    > (This is Fidelity's response to my mother's question about this)
    >
    > I do understand your point of view to use code "Q" on your Roth
    > IRA 1099-R.
    >
    > The following is from the 2011 Instructions for Forms 1099-R and
    > 5498:
    >
    > Use Code Q for a distribution from a Roth IRA if you know that the
    > participant meets the 5-year holding period and:
    > * The participant has reached age 59 1/2,
    > * The participant died, or
    > * The participant is disabled.
    > Note: If any other code, such as 8 or P, applies, use Code J.
    >
    > Use Code T for a distribution from a Roth IRA if you do not know
    > if the 5-year holding period has been met but:
    > * The participant has reached age 59 1/2,
    > * The participant died, or
    > * The participant is disabled.
    > Note: If any other code, such as 8 or P, applies, use Code J.
    >
    > As you can see from above, the IRS Tax Reporting Guidelines do
    > offer financial institutions the flexibility to use Code Q or T
    > for Roth IRA distributions. Code Q puts the burden of proof on
    > financial institution to determine if the distribution is
    > qualified or not. Therefore, we have decided to use Code T for all
    > post age 59 1/2 Roth IRA distributions.
    >
    > _There are no instances where we will issue a Roth IRA 1099-R with
    > a Code Q._
    >
    > While I know that not all investors will necessarily agree with
    > our position, I do hope you understand why we choose this option.
     
    Gary, Jan 26, 2012
    #2
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  3. Rich Carreiro

    hakujin

    Joined:
    Mar 6, 2013
    Messages:
    1
    You can add Navy Federal to this list but I wouldn't call it a categorical stance, unless you mean categorical ignorance. They won't properly code Q on an early withdrawal on a Roth for disability because their (not so bright) CPAs think Roth IRAs do not qualify for a no penalty early withdrawal.

    I really can't fathom how one financial institution can be so stupid.
     
    hakujin, Mar 6, 2013
    #3
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