Roth IRA conversion problem...


D

david

Is there any relief for this situation?

Here's the issue: in 1998, Taxpayer rolled some IRA money
into a mutual fund for a ROTH conversion and prepared his
tax returns showing the converions and paid the tax due over
the four year installment plan. However, his broker it
appears never forwarded the roth conversion form to the fund
company so on their statements they still show the account
to be a Traditional IRA (up to today in 2003). When I
brought this to their attention, we called the fund company
who has advised us that they will make a change with a
letter of indemnity and a current dated ROTH IRA conversion
form. Our concern is that if we do this, it will trigger
another reporting to the IRS that we did another ROTH
Conversion and then taxes will be due again. If we don't do
that, I suppose amended returns are an option,but a
complicated one at best...
 
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B

Barry Picker

david said:
Is there any relief for this situation?

Here's the issue: in 1998, Taxpayer rolled some IRA money
into a mutual fund for a ROTH conversion and prepared his
tax returns showing the converions and paid the tax due over
the four year installment plan. However, his broker it
appears never forwarded the roth conversion form to the fund
company so on their statements they still show the account
to be a Traditional IRA (up to today in 2003). When I
brought this to their attention, we called the fund company
who has advised us that they will make a change with a
letter of indemnity and a current dated ROTH IRA conversion
form. Our concern is that if we do this, it will trigger
another reporting to the IRS that we did another ROTH
Conversion and then taxes will be due again. If we don't do
that, I suppose amended returns are an option,but a
complicated one at best...
As of now, you do not have a Roth IRA. You have a few
options as to the tax already paid. One is to ask the IRS
to deem the conversion made in 1998. They may permit it if
you can show that the taxpayer did all the proper paperwork
and the broker screwed it up. However, someone may asked
why it took so long for the taxpayer to wake up. Another
option is to file amended returns, but at least '98 is
closed, and '99 may be closed also.

If you do a conversion in '03, you will owe tax on the
conversion for '03.

Is the broker willing to pay for his error?

Barry Picker, CPA/PFS, CFP
 

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