Question on transferring money from IRA to Roth IRA

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beernutz
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Question on transferring money from IRA to Roth IRA

Post by beernutz »

I intended to transfer $3k from my Schwab investment account to my adult daughter's Schwab Roth IRA account however I wrote down the wrong account number and sent it to her Schwab Contributory IRA account instead. She saw the money was in the wrong account and did an internal transfer from the IRA into the Roth IRA. The money was in her IRA only a couple days before she put it in the Roth IRA.

Did she trigger a taxable event by doing this transfer?
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
Rainmaker41
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Re: Question on transferring money from IRA to Roth IRA

Post by Rainmaker41 »

Did custodian record the incoming transfer to her Traditional IRA as a contribution?

Did she convert the Traditional IRA funds to her Roth IRA?
RetiredAL
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Re: Question on transferring money from IRA to Roth IRA

Post by RetiredAL »

beernutz wrote: Sat Oct 17, 2020 5:44 pm I intended to transfer $3k from my Schwab investment account to my adult daughter's Schwab Roth IRA account however I wrote down the wrong account number and sent it to her Schwab Contributory IRA account instead. She saw the money was in the wrong account and did an internal transfer from the IRA into the Roth IRA. The money was in her IRA only a couple days before she put it in the Roth IRA.

Did she trigger a taxable event by doing this transfer?
I did a similar boo-boo crossing Wife's IRA and ROTH account numbers on a small $ transfer from a qualified retirement plan. Called Schwab when it was discovered a few days later and they said no problem, they fixed it as 'posting error'.
tibbitts
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Re: Question on transferring money from IRA to Roth IRA

Post by tibbitts »

beernutz wrote: Sat Oct 17, 2020 5:44 pm I intended to transfer $3k from my Schwab investment account to my adult daughter's Schwab Roth IRA account however I wrote down the wrong account number and sent it to her Schwab Contributory IRA account instead. She saw the money was in the wrong account and did an internal transfer from the IRA into the Roth IRA. The money was in her IRA only a couple days before she put it in the Roth IRA.

Did she trigger a taxable event by doing this transfer?
At Vanguard, if the source IRA was a traditional and the destination a Roth, the web transfer would trigger warnings and ask you how much you wanted withheld in taxes. So I'm not sure what happened if you didn't get those messages in your Schwab transfer. The number of days doesn't matter as far as I know and yes it would be a taxable event.
retiredjg
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Re: Question on transferring money from IRA to Roth IRA

Post by retiredjg »

beernutz wrote: Sat Oct 17, 2020 5:44 pm She saw the money was in the wrong account and did an internal transfer from the IRA into the Roth IRA.

Did she trigger a taxable event by doing this transfer?
This sounds like a Roth conversion to me. I think it will be taxable and I don't see any way to fix it. A conversion can no longer be undone.

No problem really....unless she has other money in tIRA (SIMPLE, Rollover, SEP or traditional IRA). If she does, there will be pro-rating issues to deal with.

She needs to fill out Form 8606 with her 2020 taxes.

I suppose one might make a plea to Schwab that the money went to the wrong account by mistake and she didn't know not to try to "fix" it that way.....not sure such a plea will make any difference.
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beernutz
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Re: Question on transferring money from IRA to Roth IRA

Post by beernutz »

RetiredAL wrote: Sat Oct 17, 2020 6:20 pm
beernutz wrote: Sat Oct 17, 2020 5:44 pm I intended to transfer $3k from my Schwab investment account to my adult daughter's Schwab Roth IRA account however I wrote down the wrong account number and sent it to her Schwab Contributory IRA account instead. She saw the money was in the wrong account and did an internal transfer from the IRA into the Roth IRA. The money was in her IRA only a couple days before she put it in the Roth IRA.

Did she trigger a taxable event by doing this transfer?
I did a similar boo-boo crossing Wife's IRA and ROTH account numbers on a small $ transfer from a qualified retirement plan. Called Schwab when it was discovered a few days later and they said no problem, they fixed it as 'posting error'.
Thanks I will call them.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
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beernutz
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Re: Question on transferring money from IRA to Roth IRA

Post by beernutz »

beernutz wrote: Sat Oct 17, 2020 7:21 pm
RetiredAL wrote: Sat Oct 17, 2020 6:20 pm
beernutz wrote: Sat Oct 17, 2020 5:44 pm I intended to transfer $3k from my Schwab investment account to my adult daughter's Schwab Roth IRA account however I wrote down the wrong account number and sent it to her Schwab Contributory IRA account instead. She saw the money was in the wrong account and did an internal transfer from the IRA into the Roth IRA. The money was in her IRA only a couple days before she put it in the Roth IRA.

Did she trigger a taxable event by doing this transfer?
I did a similar boo-boo crossing Wife's IRA and ROTH account numbers on a small $ transfer from a qualified retirement plan. Called Schwab when it was discovered a few days later and they said no problem, they fixed it as 'posting error'.
Thanks I will call them.
Update in case anyone is interested. Called main Schwab CS number and they referred me to their Retirement Services area. I called them and spoke to a very helpful rep who opened a case but wasn't sure if what I wanted could be done. It was complicated by the fact that after the money was internally transferred from the Contributory IRA to the Roth IRA it was invested (in Schwab's total market index fund fwiw) and that may have to be undone. They said it would be at least a week before I heard back from them because like some relationship statuses, "it's complicated".
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
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beernutz
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Re: Question on transferring money from IRA to Roth IRA

Post by beernutz »

beernutz wrote: Tue Oct 20, 2020 2:05 pm
beernutz wrote: Sat Oct 17, 2020 7:21 pm
RetiredAL wrote: Sat Oct 17, 2020 6:20 pm
beernutz wrote: Sat Oct 17, 2020 5:44 pm I intended to transfer $3k from my Schwab investment account to my adult daughter's Schwab Roth IRA account however I wrote down the wrong account number and sent it to her Schwab Contributory IRA account instead. She saw the money was in the wrong account and did an internal transfer from the IRA into the Roth IRA. The money was in her IRA only a couple days before she put it in the Roth IRA.

Did she trigger a taxable event by doing this transfer?
I did a similar boo-boo crossing Wife's IRA and ROTH account numbers on a small $ transfer from a qualified retirement plan. Called Schwab when it was discovered a few days later and they said no problem, they fixed it as 'posting error'.
Thanks I will call them.
Update in case anyone is interested. Called main Schwab CS number and they referred me to their Retirement Services area. I called them and spoke to a very helpful rep who opened a case but wasn't sure if what I wanted could be done. It was complicated by the fact that after the money was internally transferred from the Contributory IRA to the Roth IRA it was invested (in Schwab's total market index fund fwiw) and that may have to be undone. They said it would be at least a week before I heard back from them because like some relationship statuses, "it's complicated".
Well update to the update is that Schwab can't do anything since the money transferred from the Contributory IRA to the Roth IRA had been invested while in the Roth. It was 100% my mistake and their explanation of why they can't help made sense. At least they tried.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
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