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IRS Response To Court Ruling On Rollovers

Friday, March 21, 2014 - 8:41 AM
7
Ally6770Ally6770914 posts since
Jan 16, 2010
Rep Points: 2,658
1. Friday, March 21, 2014 - 10:23 PM
Thanks Ally for posting this.

What a pain in the as*. Thank you IRS for making an unnecessarily complicated process for transferring IRA money even harder. Are govt bureaucrats doing this stuff on purpose or are they just stupid ignoramuses.
4
loulou544 posts since
Aug 3, 2010
Rep Points: 3,397
2. Saturday, March 22, 2014 - 8:19 AM
Actually, the IRS is complying with a court ruling of a law made my congress. You can still make as many transfers as you want, but only one rollover. 
3
Ally6770Ally6770914 posts since
Jan 16, 2010
Rep Points: 2,658
3. Saturday, March 22, 2014 - 8:59 AM
ALLY - there you go again, - Making sense.  When all I really wanted to do was use this forum to whine a little!  Guess I'll have to take my personal venting somewhere it is appreciated!
1
Anon456Anon45630 posts since
Oct 30, 2011
Rep Points: 76
4. Saturday, March 22, 2014 - 6:17 PM
Anyone who has opened IRA CD accounts at banks or credit unions and has had to transfer IRA money from another bank or credit union knows exactly what I am talking about. The 60-day rollovers were heck of a lot of easier than trustee-to-trustee transfers. Now the IRS (not Congress) is choosing to interpret the law to make 60-day rollovers much harder. Say what you will, this is the govt making life harder for ordinary folks for no good reason.
7
loulou544 posts since
Aug 3, 2010
Rep Points: 3,397
5. Tuesday, March 25, 2014 - 6:57 AM
Someone please explain to me concerning transfers and rollovers:  Is there a difference in what each of these accomplish?, and is there good reason to treat them differently as they both move funds from one account to another?  (I do understand what a transfer and rollover themselves are, just not why they are treated differently.)
2
bwk1954bwk19545 posts since
Dec 8, 2011
Rep Points: 18
6. Tuesday, March 25, 2014 - 10:18 AM
A rollover is where you physically touch the check and move it yourself. A transfer is where the transaction is done by the institution and you fill out the papers requesting them to do it. When there is a transfer done by the institution is is much easier to trace with institutional paperwork. Congress makes the laws, courts interpret and agencies follow. An inherited IRA can also never have a rollover.  A transferred IRA can never be handled through a wire but must be done through the mail. Maybe the rules were made because a paper trail is much easier to follow when done through an institution because of their regulations rather than when a person does it. Trails and documentation get lost more often when a person does it but institutions used to have 3 places where copies of records were kept but not sure about now. I would assume if there is enough outrage by the people congress will react. It would be interesting to find out why an inherited IRA has never been allowed to have a rollover but a traditional or Roth IRA could have rollovers. 
3
Ally6770Ally6770914 posts since
Jan 16, 2010
Rep Points: 2,658
7. Tuesday, March 25, 2014 - 10:45 AM
"Roll it over. A spouse can simply roll over the account into his or her own existing or new IRA account and can continue contributing to it. Non-spousal beneficiaries cannot roll over inherited IRA funds, nor can they add money to an inherited account."

Could the answer to the "rollover" problem for non-spousal beneficiaries be because they are not supposed to change the name on the inherited IRA.  If their name isn't on it, how can they  physically take possession of the check and move it themselves?  They would have to do a Trustee to Trustee Transfer from what I understand. 
5
paoli2paoli21,372 posts since
Aug 10, 2011
Rep Points: 6,011
8. Tuesday, March 25, 2014 - 11:21 AM
In a non-spousal inherited IRA your name is on it as FBO if titled correctly. 
2
Ally6770Ally6770914 posts since
Jan 16, 2010
Rep Points: 2,658
9. Tuesday, March 25, 2014 - 2:20 PM
Ally,
Re: (March 25, 2014 - 10:18 AM)  "A rollover is where you physically touch the check and move it yourself".

1)  I transfered my lump sum pension from my prior employer to a brokerage firm, It is called a ROLLOVER IRA.  I never had possession of the check, only filled out paper work.

2)  My wife transfered her lump sum pension from her prior employer to a Federal Bank, it is called a  ROLLOVER IRA.  She never had possession of the check, only filled out paper work.

It appears that everyone's definition of "ROLLOVER IRA" is different.  Is there anywhere the IRS states exactly what a Rollover IRA is?
3
halhal4 posts since
Apr 22, 2012
Rep Points: 10
10. Tuesday, March 25, 2014 - 3:17 PM
Some firms do use the terms rollover for a rollover and direct rollover for a transfer. I have never received a 1099 where I had to report it on the line 15 a or b (can't think of which it is without looking it up)  on the 1040 when the institution did the transaction or when I had the name of the institution as trustee for myself for my IRA ( my name put on the check).  I have had to use that line when I have done the rollover myself unless I had the check made out to the bank or credit union I was taking it as trustee for IRA for (my name) . The only "Rollover IRA" with any of  my IRA's I had was at Pen Fed  for a small one I rolled over myself from Fidelity in the 90's.  I did not call to have it changed but when it was added to and combined with another IRA's, there was no problem. They combined several with with other IRA's I had at the time. Mine pensions or 401K's were not called  a rollover IRA when I retired or why my husband retired on either of our 401K's or my pension that I cashed out and put into IRA's. On all of ours we had the checks made out to the place we were taking it as trustees for an IRA for (our names). By doing it this way I was able to get the checks through interoffice mail the next day (from 3 states away)  and take it to the institution I was moving it to the same day I received the check and did not have to wait for days or weeks like my sister did doing a transfer from a city 40 miles away. 
The IRS has this for IRAs  from other pension plans. Did you get a 1099 on yours when you had this done? That is the only thing you really have to concern yourself with I think because of the tax consequences if not put on line 15. 
Retirement Topics - Rollovers of Retirement Plan Distributions 
1
Ally6770Ally6770914 posts since
Jan 16, 2010
Rep Points: 2,658
11. Tuesday, March 25, 2014 - 3:18 PM
Hal:  I found this site which seems to put it in simple terms:
IRA Transfers vs. Rollovers: What Is The Difference?

We had the same experience as you did and never touched the funds yet they called it a Rollover IRA too.  It can be confusing so I did a bit of research on my own.
2
paoli2paoli21,372 posts since
Aug 10, 2011
Rep Points: 6,011
12. Tuesday, March 25, 2014 - 5:05 PM
To #11 Your link says
You would use IRS form 5498 when you file your taxes to document the contribution into the new retirement account.

But IRS link says Form 5498:  Your IRA trustee or issuer – not you – is required to file this form with the IRS by May 31.

Not sure I am understanding your link correctly. Maybe you can explain because you file taxes by April 15 but this form is not sent out until May 31 by the trustee the IRS states. How did you use this form? 
1
Ally6770Ally6770914 posts since
Jan 16, 2010
Rep Points: 2,658
13. Tuesday, March 25, 2014 - 5:39 PM
#12  I think you may be misunderstanding what you are reading.  First, I cannot find what you are referring to in my link.  This may be helpful to you:
"The information on Form 5498 is submitted to the Internal Revenue Service by the trustee or issuer of your individual retirement arrangement (IRA) to report contributions, including any catch-up contributions, required minimum distributions (RMDs), and the fair market value (FMV) of the account."

That is not from my link but from the IRS information.  I, personally, am not that familiar with Form 5498 unless I received them many years ago.  All I get now is information on 1099-R relating to our RMDs.  However, if the link is stating you would use IRS Form 5498 when you file your taxes etc. would it not be concerning using the needed information on the 5498 for taxes and not the fact that "we" are the ones who actually file this form with the IRS?  I only use these forms from others for informational purposes only for our taxes.
 BTW, I received my 2013 RMD info on 1099-R in January 2014 to have in plenty enough time to use for my 2013 taxes which I do early.  I can't remember receiving any forms in May unless they are to be used for the next year's tax report.
2
paoli2paoli21,372 posts since
Aug 10, 2011
Rep Points: 6,011
14. Tuesday, March 25, 2014 - 5:54 PM
#11  I know what form 5498 is. I had other links opened and most likely got it mixed up from a link on your site or from a link from a link or when I was on the IRS site trying to find a definition of a transfer vs a rollover for Hal. Sorry if it wasn't from your link. 

Edit---- it is from your link. 5 paragraph in the middle. 
1
Ally6770Ally6770914 posts since
Jan 16, 2010
Rep Points: 2,658
15. Tuesday, March 25, 2014 - 7:53 PM
#14  Right.  That is the sentence I posted.  I think you just misunderstood what it meant.  We use the form 5498 for informational purposes but the info is sent to the IRS by those we have the IRAs with.  We don't need to send form 5498 to the IRS.   I'm sure you understand this. 
2
paoli2paoli21,372 posts since
Aug 10, 2011
Rep Points: 6,011
16. Wednesday, March 26, 2014 - 8:45 PM
#14 You said you use form 5498 for informational purposes. Form 5498 is sent when you contribute to a new IRA.  The institutions you have IRAs with do not send them. You are not working so you cannot contribute and therefore are you sure you are getting them?  
1
Ally6770Ally6770914 posts since
Jan 16, 2010
Rep Points: 2,658
17. Thursday, March 27, 2014 - 8:59 AM
#16  The past, Ally, the past.  I need to be sure to double check my replies so you or others will not misunderstand.  We "did" contribute to IRAs "in the past" and we "probably" got the 5498 form but any forms like that we got "I" used for informational purposes only.  In fact, the 1099-R which we get now for RMDs states they are sharing the info with the IRS but we don't have to send them a copy of these forms.  They are for our use "if" we owe taxes on the RMDs.  The only use we have for IRAs in these many "past" years have been for RMDs.  It has been a long time since we were able to contribute to any.  DP was thrown out of the working market about 1992 so that did it for us with IRAs except for RMDs which came many years later. 
BTW, for future purposes and your understanding, I have a habit of referring to "we" as all those who have IRAs and not just myself.  I will try to make my replies more understandable in the future. 
1
paoli2paoli21,372 posts since
Aug 10, 2011
Rep Points: 6,011
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