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Trying to tidy up my finances before the Lunar New Year (Feb. 5), since I read that the Year of the Dragon isn't supposed to be a good time for us Horse types to be making $$ decisions ;-)

It's taken some digging to figure out what my broker did to my IRA account. What's wrong with this picture?

In 1998, I opened a traditional IRA account with a full-service broker. Call this Account A. Several months later, I also started an SEP account, which I'll call Account B. By the end of 1998 I had contributed $600 to Account B and in the first 3 months of 1999 I added another $1800 before a tax professional decided I didn't qualify for an SEP.

Up to that point I had put $2400 into Account B, like so: $1500 was still in cash, $300 went into the stock fund, and $300 each into FNM and LU.

To dismantle this account, since I didn't qualify for it, I asked that the 1998 $600 be transferred to my brokerage account (yet another account), and that the 1999 $1800 (including the FNM and LU stocks) be recharacterized as a traditional IRA contribution, with $200 added to top it off to the maximum $2,000. This would still be Account B, but now a traditional IRA.

That's not what happened.

Here's what happened instead: The FNM stocks, the LU stocks, and the Hartford shares all ended up in Account A, as did $1500 in cash from the former SEP-cum-IRA.

So now Account A shows NO 1999 contribution (since the 1999 contribution was made not to this account but to Account B--are you still with me?). I had to dig through statements to figure out how much of a 1999 IRA contribution I'd actually made, since the recharacterization, SEP closeout and the transfer were done simultaneously, thus no more statements for that account and nothing to verify that, at the time of closeout, it was an IRA, not an SEP, account.

Do you see what I see in these figures? What I see is an over-contribution to my 1999 IRA of at least $400, including some $300 of Hartford stock fund actually purchased in 1998!

This is not what I asked to have done! And it's taken me this long to catch it because 1)my account statements still have errors in them and 2) our broker quit answering our questions sometime in early November, and never answered our questions adequately once I started asking about this mess. We've switched brokers (with the same company) but what do I do about my IRA?

S.O.S

kse4
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<<what do I do about my IRA? >>

Do you have a written record of your instuctions?
Have you talked to the broker's supervisor?
That's why I like using an online broker.
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I would post this on the 'FOOLS' IRA message board; all the experts are there! You may have some recourse
under the "60 day rule" to reverse without penalty.
So get a re-post quickly! Good Luck - - Matthew
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Greetings, kse4, and welcome. You wrote in part:

<<In 1998, I opened a traditional IRA account with a full-service broker. Call this Account A. Several months later, I also started an SEP account, which I'll call Account B. By the end of 1998 I had contributed $600 to Account B and in the first 3 months of 1999 I added another $1800 before a tax professional decided I didn't qualify for an SEP.

Up to that point I had put $2400 into Account B, >>


Okay, so you have made an excess contribution of $600 for 1998 and $1,800 for 1999. You will be penalized 6% on the 1998 amount for 1998 and (I think) 1999 as well. But you have until April 17 to get the $1,800 plus any earnings thereon out of the IRA to avoid any 6% penalty on that money as well. See you tax advisor now or read IRS Publication 590 (Individual Retirement Arrangements) for the details. You can get the latter at http://www.irs.ustreas.gov/prod/forms_pubs/index.html.

<<To dismantle this account, since I didn't qualify for it, I asked that the 1998 $600 be transferred to my brokerage account (yet another account), and that the 1999 $1800 (including the FNM and LU stocks) be recharacterized as a traditional IRA contribution, with $200 added to top it off to the maximum $2,000. This would still be Account B, but now a traditional IRA.>>

Okay, that would satisfy the IRS provided any earnings on the $1,800 accompanied the transfer.

<<That's not what happened.

Here's what happened instead: The FNM stocks, the LU stocks, and the Hartford shares all ended up in Account A, as did $1500 in cash from the former SEP-cum-IRA.

So now Account A shows NO 1999 contribution (since the 1999 contribution was made not to this account but to Account B--are you still with me?). I had to dig through statements to figure out how much of a 1999 IRA contribution I'd actually made, since the recharacterization, SEP closeout and the transfer were done simultaneously, thus no more statements for that account and nothing to verify that, at the time of closeout, it was an IRA, not an SEP, account.

Do you see what I see in these figures? What I see is an over-contribution to my 1999 IRA of at least $400, including some $300 of Hartford stock fund actually purchased in 1998!

This is not what I asked to have done! And it's taken me this long to catch it because 1)my account statements still have errors in them and 2) our broker quit answering our questions sometime in early November, and never answered our questions adequately once I started asking about this mess. We've switched brokers (with the same company) but what do I do about my IRA? >>


And that's something you must work out with the brokerage. I hope you kept good records of your conversations and had something in writing to support the recharacterization request. And I'll repeat what I said before. You better talk with your tax advisor soon. Otherwise the IRS will probably have a lot of questions.

Regards..Pixy
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