Scottrade wrong IRA distribution

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btenny
Posts: 4456
Joined: Sun Oct 07, 2007 6:47 pm

Scottrade wrong IRA distribution

Post by btenny » Thu Dec 14, 2017 10:44 am

Well Scottrade made a major error this week. I asked them to cut me a check from my IRA for my church for $1K and gave them detail paperwork to do this last week. On Tuesday I got a check in the mail made out to me for $10K. Scottrade took out the wrong amount and made the check out to me instead of my church. I did not cash the check.

I called them and they quickly admitted they blew it and would correct the error. So they called me back late yesterday and said all is well and I will receive a new corrected check in 4 days or so. They also said they put a stop on the old check.

Today I logged onto my account to see the status. They did indeed put the $10K back in my account and cut a new check for $1K. But the transaction log shows $10K was gone for 5 days from the account. How will Scottrade report this to the IRS? So how does the IRS view such mistakes? Are they (the IRS) going to say that was qualified distribution and the redeposit was an incorrect add? What are the rules when something like this happens? Anyone have experience with errors like this?

Please advise. Thanks in advance.



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bberris
Posts: 1013
Joined: Sun Feb 20, 2011 9:44 am

Re: Scottrade wrong IRA distribution

Post by bberris » Fri Dec 15, 2017 9:16 am

Probably reported as a rollover. Since less than 60 days passed before the redeposit, there will be no tax. The only consequence would be that you cannot do another rollover for 12 months.

Alan S.
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Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Scottrade wrong IRA distribution

Post by Alan S. » Fri Dec 15, 2017 1:19 pm

It sounds to me more like they voided their own error and therefore will NOT report the 10k distribution on the 1099R. You should call them to confirm that since 1099R processing will begin in early January and you should insist that they do not issue one. Even if you did not do a prior indirect rollover, you do not want to be locked out of doing one for the next 12 months because of their error.

btenny
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Joined: Sun Oct 07, 2007 6:47 pm

Re: Scottrade wrong IRA distribution

Post by btenny » Fri Dec 15, 2017 2:25 pm

Thanks for the information on the "rollover language". I will call them and make sure they do not report it and see if they agree. So TBD....

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Scottrade wrong IRA distribution

Post by livesoft » Fri Dec 15, 2017 2:29 pm

TDAmeritrade made an $85,000 mistaken transaction in my spouse's 401(k). They took about 10 days to fix it. We are not worried about if they report it because that would just be another mistake that they have to fix. We simply do not fear the IRS at all. They are good people doing their jobs.
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RetiredAL
Posts: 115
Joined: Tue Jun 06, 2017 12:09 am
Location: SF Bay Area

Re: Scottrade wrong IRA distribution

Post by RetiredAL » Fri Dec 15, 2017 7:33 pm

Earlier this year at Schwab, I inadvertently deposited a small ($1500) pre-tax rollover check into a Roth account instead of into a tIRA account. Error was caught in 3 days. The account numbers were very similar. Schwab said no problem, that they could reverse the incorrect deposit to as if it never had occurred.

Today, the tIRA deposit shows as IRA Rollover Contribution and the Roth shows a IRA Rollover Contribution followed by Deposit Error Correction.

Lesson learned, when I did my Roll-Over IRA to Roth conversion last week at Fidelity, where I have multiple Roll-Over and Roth IRA's, I specified account xx with a balance of yyyy as the source, and account zz with a balance of zero as the destination.

btenny
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Joined: Sun Oct 07, 2007 6:47 pm

Re: Scottrade wrong IRA distribution

Post by btenny » Sat Dec 16, 2017 1:36 pm

Livesoft you may not fear the IRS but they can sure be a PIA. Way back when I was a puppy in my early 20s I was doing lots of rental real estate. I got audited by the IRS. I made a simple adding mistake on my return. But they wanted a set down interview. They poked their nose into every record and receipt and dug into everything about my rentals when my simple error had nothing to do with that. They disallowed several itemized deductions I had taken. They stopped me from depreciating stuff. They then asked me to come back in a week with 3 more years of old returns so they could look at other stuff. It was darn scary and costly. I ended up owning them $1000 or more plus late payment penalties which was big money back when. Plus they disallowed lots of stuff in the future. I was then audited for the next few years. Each year they sent me letters requesting more data from their paper reviews.

So maybe you do not fear them but I want to watch exactly what is sent to the IRS and what it says.

DrGoogle2017
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Joined: Mon Aug 14, 2017 12:31 pm

Re: Scottrade wrong IRA distribution

Post by DrGoogle2017 » Sat Dec 16, 2017 1:52 pm

btenny wrote:
Sat Dec 16, 2017 1:36 pm
Livesoft you may not fear the IRS but they can sure be a PIA. Way back when I was a puppy in my early 20s I was doing lots of rental real estate. I got audited by the IRS. I made a simple adding mistake on my return. But they wanted a set down interview. They poked their nose into every record and receipt and dug into everything about my rentals when my simple error had nothing to do with that. They disallowed several itemized deductions I had taken. They stopped me from depreciating stuff. They then asked me to come back in a week with 3 more years of old returns so they could look at other stuff. It was darn scary and costly. I ended up owning them $1000 or more plus late payment penalties which was big money back when. Plus they disallowed lots of stuff in the future. I was then audited for the next few years. Each year they sent me letters requesting more data from their paper reviews.

So maybe you do not fear them but I want to watch exactly what is sent to the IRS and what it says.
They never audited me. I made a lot of adding errors in their favors, maybe that’s why. One thing I’m glad is TT software will add and subtract correctly.

Spirit Rider
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Joined: Fri Mar 02, 2007 2:39 pm

Re: Scottrade wrong IRA distribution

Post by Spirit Rider » Sat Dec 16, 2017 2:31 pm

btenny wrote:
Sat Dec 16, 2017 1:36 pm
So maybe you do not fear them but I want to watch exactly what is sent to the IRS and what it says.
It sounds like they were just doing there doing their job, and doing it well.

1. You made a mistake so you came to their attention.
2. They found substantial incorrect filings.
3. This caused them to look closer and they found more errors.
4. They determined that your returns could not be trusted, so they audited more.

It sounds to me like they were correct in doing a more expansive audit in the first place. I have been audited and in my experience, yes they were thorough, but polite, professional and reasonable.

btenny
Posts: 4456
Joined: Sun Oct 07, 2007 6:47 pm

Re: Scottrade wrong IRA distribution

Post by btenny » Sat Dec 16, 2017 9:03 pm

Spirit and Live. I made a simple math adding error that the IRS found. This was before TT. The IRS used that as an excuse to detail review all my tax plans and all my receipts. In the 1970s rentals were dissected into various components and then various depreciation rates were used on each of the parts. I made no mistakes on anything to do with this. But since I did not have data from the builder for the various components they would not allow my depreciation plan. It is all very subjective. The agent said I had to use whole house depreciation over a long period for everything. This dramatically reduced my allowed depreciation. My accountant said my original plan was fine. Carpets wear out fast. So does other stuff and you can depreciate it faster than 30-50 years.

In my case the IRS agent was rude and aggressive and told me I had to do it his way. Take it or leave it. I was 25. He was 55 and treated me like a kid. I did not take my accountant (my guy was really a book keeper) or a lawyer (I did not have one in fact) to the IRS meeting because those guys cost money. I thought it was no big thing. As I said he basically redid my return and told me to do stuff his way. The agent told me my only recourse was to appeal. Then the next week he did the same thing for my previous three years returns. After it was over my accountant told me it would cost more than I was paying to appeal and get the ruling changed.

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