Whoops, thought wife's tIRA was Roth...help!

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Galaga
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Whoops, thought wife's tIRA was Roth...help!

Post by Galaga » Wed Dec 05, 2018 10:14 am

My wife thought she had opened a Roth with Scottrade/TD Ameritrade after finishing school but it turns out it was a post tax traditional IRA. She contributed for a few years, we got married, got better jobs, and then got an advisor to help with our finances. He did not manage this tIRA and we all figured it was a Roth. He then helped us with backdoor Roths for a number of years. After leaving a former job she rolled over her 401K into a new IRA, therefore we stopped doing backdoor Roths for her. We have since decided to leave the advisor and are transferring all funds to Vanguard. Of course, Vanguard won't allow transfer of this old Scottrade/TD Ameritrade IRA into Vanguard Roth account. What do we do now!?!?! Did we break the pro-rata rule with all the backdoor Roths? Since she now has the rollover IRA I assume I can't just convert the old IRA to Roth and pay taxes. Here is the breakdown:

2003-2007 maxed out post tax tIRA with Scottrade/TD Ameritrade and thought it was Roth: current account value $34,000
2008-2016 maxed out backdoor Roth with advisor (now with Vanguard): current account value $88,000
2017: old employer 401k rolled over to IRA with advisor (now transferred to Vanguard), no new Roth investment
2018: no new Roth investment

Thanks in advance!

quantAndHold
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by quantAndHold » Wed Dec 05, 2018 11:06 am

I’m guessing that the IRS doesn’t know about this IRA, since they never dinged you for taxes before.

The statute of limitations for the IRS is 3 years, unless they find that you substantially underreported your income. Then it’s 6 years. My reading is that “substantial” is when you underreported by 25% or more, which I’m guessing is not the case here.

Not coincidentally, you can amend up to the last three years worth or returns.

So the legal and correct solution is probably to amend the past 3 years, and pay what you owe, and at the same time, fix your nondeductible IRA basis.

megabad
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by megabad » Wed Dec 05, 2018 12:28 pm

The statue of limitations on filing a false or fraudulent return is unlimited. It is not clear in many situations what constitutes this and the IRS has significantly lower legal bar for pursuing action than just about any other entity. It is my opinion (morally) that you should prepare a good faith estimate and amended returns and go to the IRS to discuss if acceptable. In my experience, the IRS values honesty and is unlikely to cause you much harm if you approach with good faith. Seek knowledgeable professional help.

Galaga
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by Galaga » Wed Dec 05, 2018 1:09 pm

quantAndHold wrote:
Wed Dec 05, 2018 11:06 am

So the legal and correct solution is probably to amend the past 3 years, and pay what you owe, and at the same time, fix your nondeductible IRA basis.

Thank you for the reply quantAndHold. I was with you until the last sentence. Which account would I owe money on? The backdoor Roths? Rollover IRA? Both? Would this be taxed at our marginal income tax rate? I will be consulting a tax professional but would like to have a rough idea of what I will owe if possible.

Also, what do you mean by fixing our nondeductable IRA basis? Paying tax on the growth?

Thanks again

megabad
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by megabad » Wed Dec 05, 2018 1:21 pm

Galaga wrote:
Wed Dec 05, 2018 1:09 pm
quantAndHold wrote:
Wed Dec 05, 2018 11:06 am

So the legal and correct solution is probably to amend the past 3 years, and pay what you owe, and at the same time, fix your nondeductible IRA basis.

Thank you for the reply quantAndHold. I was with you until the last sentence. Which account would I owe money on? The backdoor Roths? Rollover IRA? Both? Would this be taxed at our marginal income tax rate? I will be consulting a tax professional but would like to have a rough idea of what I will owe if possible.

Also, what do you mean by fixing our nondeductable IRA basis? Paying tax on the growth?

Thanks again
Basically he was referring to your line:
2003-2007 maxed out post tax tIRA with Scottrade/TD Ameritrade and thought it was Roth: current account value $34,000

You should have tracked the basis as this is a nondeductible IRA. This is done on form 8606. You will need to track the basis going all the way back to 2003. Well at least if you care about preferential tax treatment or Roth conversion you will. Really this is cleaner if you at least run back through and at least numerically calculate what you should have done over the past 15 years. Even if you don't refile, at least preparing the correct 1040 and 8606 for each year will tell you what should have happened in case you need to know in the future.

retiringwhen
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiringwhen » Wed Dec 05, 2018 1:26 pm

megabad wrote:
Wed Dec 05, 2018 1:21 pm
Galaga wrote:
Wed Dec 05, 2018 1:09 pm
quantAndHold wrote:
Wed Dec 05, 2018 11:06 am

So the legal and correct solution is probably to amend the past 3 years, and pay what you owe, and at the same time, fix your nondeductible IRA basis.

Thank you for the reply quantAndHold. I was with you until the last sentence. Which account would I owe money on? The backdoor Roths? Rollover IRA? Both? Would this be taxed at our marginal income tax rate? I will be consulting a tax professional but would like to have a rough idea of what I will owe if possible.

Also, what do you mean by fixing our nondeductable IRA basis? Paying tax on the growth?

Thanks again
Basically he was referring to your line:
2003-2007 maxed out post tax tIRA with Scottrade/TD Ameritrade and thought it was Roth: current account value $34,000

You should have tracked the basis as this is a nondeductible IRA. This is done on form 8606. You will need to track the basis going all the way back to 2003. Well at least if you care about preferential tax treatment or Roth conversion you will. Really this is cleaner if you at least run back through and at least numerically calculate what you should have done over the past 15 years. Even if you don't refile, at least preparing the correct 1040 and 8606 for each year will tell you what should have happened in case you need to know in the future.
There is not statue of limitations or other limit on when you can file old 8606’s. I found out I could fix an error from 1989, but chose not to as it will only save me $80 in taxes eventually. But I could have :-)

In your case it could be the marginal taxes on $27,500 (I think the limit was $5,500 back then, could be wrong.)

Also, from the perspective of the Roth conversion error, it also works in your favor as you would have owed a lot less tax on the after-tax portion. Overall this sounds like a serious spread-sheet exercise to untangle, I don’t envy you.

quantAndHold
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by quantAndHold » Wed Dec 05, 2018 2:07 pm

Galaga wrote:
Wed Dec 05, 2018 1:09 pm
quantAndHold wrote:
Wed Dec 05, 2018 11:06 am

So the legal and correct solution is probably to amend the past 3 years, and pay what you owe, and at the same time, fix your nondeductible IRA basis.

Thank you for the reply quantAndHold. I was with you until the last sentence. Which account would I owe money on? The backdoor Roths? Rollover IRA? Both? Would this be taxed at our marginal income tax rate? I will be consulting a tax professional but would like to have a rough idea of what I will owe if possible.

Also, what do you mean by fixing our nondeductable IRA basis? Paying tax on the growth?

Thanks again
Ah. This is fun to explain. Basically, the way traditional IRAs work is that when you withdraw money from them, you pay taxes on the part that hasn’t already been taxed. In the case of your wife’s mistaken IRA, this would be the growth. The magic of the Backdoor Roth is that since you contribute with after tax dollars and then convert immediately, there is no money in the IRA that hasn’t already been taxed.

When you have growth, though, the way a withdrawal is taxed is you figure out what percentage of the IRA is nondeductible contributions (the tax has already been paid) and what percentage is still taxable. Then when you make the withdrawal, you pay the tax on the taxable part.

An example. Say, over the years, you contributed $5,000, after tax, to an IRA. Then it grew to $15,000. Then you take a $3,000 withdrawal. The original basis would be $5,000. The percentage of the withdrawal that’s subject to tax is 67% (essentially $10,000 growth/$15,000 total). So $2,000 of your $3,000 withdrawal would be subject to tax, and the nondeductible basis would be reduced by $1,000.

The way a Roth conversion works is that you’re essentially doing a withdrawal from the traditional IRA, then contributing to a Roth. The monkey wrench in your situation is that the IRS considers all of your traditional and rollover IRAs to be a single pot of money for tax purposes. So when you already have a traditional IRA balance and do a “backdoor” Roth, you need to pay the tax on part of the growth from the existing IRA.

Anyway, the short answer is you’re going to have to pay taxes on the growth of the original IRA. The even shorter answer is, get a professional. Ugh. I think my brain melted trying to explain it. Hope this helps.

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BL
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by BL » Wed Dec 05, 2018 2:39 pm

I think you'll want to do 8606 from the start, otherwise you will pay tax on it all when you sell. The 8606 informs IRS that you didn't deduct it so they won't make you pay it again.

retiredjg
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiredjg » Wed Dec 05, 2018 3:11 pm

Galaga wrote:
Wed Dec 05, 2018 10:14 am
My wife thought she had opened a Roth with Scottrade/TD Ameritrade after finishing school but it turns out it was a post tax traditional IRA. She contributed for a few years, we got married, got better jobs, and then got an advisor to help with our finances. He did not manage this tIRA and we all figured it was a Roth. He then helped us with backdoor Roths for a number of years. After leaving a former job she rolled over her 401K into a new IRA, therefore we stopped doing backdoor Roths for her. We have since decided to leave the advisor and are transferring all funds to Vanguard. Of course, Vanguard won't allow transfer of this old Scottrade/TD Ameritrade IRA into Vanguard Roth account. What do we do now!?!?! Did we break the pro-rata rule with all the backdoor Roths? Since she now has the rollover IRA I assume I can't just convert the old IRA to Roth and pay taxes. Here is the breakdown:

2003-2007 maxed out post tax tIRA with Scottrade/TD Ameritrade and thought it was Roth: current account value $34,000
2008-2016 maxed out backdoor Roth with advisor (now with Vanguard): current account value $88,000
2017: old employer 401k rolled over to IRA with advisor (now transferred to Vanguard), no new Roth investment
2018: no new Roth investment

Thanks in advance!
To fix this, here are the things I think you would have to do. I'm not a tax-preparer. These are just the steps that make sense to me.

File a Form 8606 for 2003, 2004, 2005, 2006, and 2007. Correct Her Form 8606 for 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, and 2016. Send in amended joint returns for 2015 and 2016 (or maybe just 2016?) because they are the only years within the time you can amend. Use the information from the 14 years of corrected Forms 8606 to file these amendments. Pay the taxes and the penalties and beg the IRS for mercy.

Option 2 - make an appointment, go in and get instructions from the IRS on what to do and then do it. It could be different from what I think.
Last edited by retiredjg on Wed Dec 05, 2018 3:49 pm, edited 1 time in total.

Galaga
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by Galaga » Wed Dec 05, 2018 3:27 pm

quantAndHold wrote:
Wed Dec 05, 2018 2:07 pm
Galaga wrote:
Wed Dec 05, 2018 1:09 pm
quantAndHold wrote:
Wed Dec 05, 2018 11:06 am

So the legal and correct solution is probably to amend the past 3 years, and pay what you owe, and at the same time, fix your nondeductible IRA basis.

Thank you for the reply quantAndHold. I was with you until the last sentence. Which account would I owe money on? The backdoor Roths? Rollover IRA? Both? Would this be taxed at our marginal income tax rate? I will be consulting a tax professional but would like to have a rough idea of what I will owe if possible.

Also, what do you mean by fixing our nondeductable IRA basis? Paying tax on the growth?

Thanks again
Ah. This is fun to explain. Basically, the way traditional IRAs work is that when you withdraw money from them, you pay taxes on the part that hasn’t already been taxed. In the case of your wife’s mistaken IRA, this would be the growth. The magic of the Backdoor Roth is that since you contribute with after tax dollars and then convert immediately, there is no money in the IRA that hasn’t already been taxed.

When you have growth, though, the way a withdrawal is taxed is you figure out what percentage of the IRA is nondeductible contributions (the tax has already been paid) and what percentage is still taxable. Then when you make the withdrawal, you pay the tax on the taxable part.

An example. Say, over the years, you contributed $5,000, after tax, to an IRA. Then it grew to $15,000. Then you take a $3,000 withdrawal. The original basis would be $5,000. The percentage of the withdrawal that’s subject to tax is 67% (essentially $10,000 growth/$15,000 total). So $2,000 of your $3,000 withdrawal would be subject to tax, and the nondeductible basis would be reduced by $1,000.

The way a Roth conversion works is that you’re essentially doing a withdrawal from the traditional IRA, then contributing to a Roth. The monkey wrench in your situation is that the IRS considers all of your traditional and rollover IRAs to be a single pot of money for tax purposes. So when you already have a traditional IRA balance and do a “backdoor” Roth, you need to pay the tax on part of the growth from the existing IRA.

Anyway, the short answer is you’re going to have to pay taxes on the growth of the original IRA. The even shorter answer is, get a professional. Ugh. I think my brain melted trying to explain it. Hope this helps.
Thank you so much for the explanation. Sorry if I made your brain melt! I have a feeling my accountant will have the same reaction! I guess I should start saving now for the future tax bill, and start sifting through the documents to find the basis. Just to be clear, this shouldn't affect her pretax rollover IRA, correct? That is a much larger account and I perish the thought of paying taxes on that account because of this screw up...

Galaga
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by Galaga » Wed Dec 05, 2018 3:36 pm

retiredjg wrote:
Wed Dec 05, 2018 3:11 pm
Galaga wrote:
Wed Dec 05, 2018 10:14 am
My wife thought she had opened a Roth with Scottrade/TD Ameritrade after finishing school but it turns out it was a post tax traditional IRA. She contributed for a few years, we got married, got better jobs, and then got an advisor to help with our finances. He did not manage this tIRA and we all figured it was a Roth. He then helped us with backdoor Roths for a number of years. After leaving a former job she rolled over her 401K into a new IRA, therefore we stopped doing backdoor Roths for her. We have since decided to leave the advisor and are transferring all funds to Vanguard. Of course, Vanguard won't allow transfer of this old Scottrade/TD Ameritrade IRA into Vanguard Roth account. What do we do now!?!?! Did we break the pro-rata rule with all the backdoor Roths? Since she now has the rollover IRA I assume I can't just convert the old IRA to Roth and pay taxes. Here is the breakdown:

2003-2007 maxed out post tax tIRA with Scottrade/TD Ameritrade and thought it was Roth: current account value $34,000
2008-2016 maxed out backdoor Roth with advisor (now with Vanguard): current account value $88,000
2017: old employer 401k rolled over to IRA with advisor (now transferred to Vanguard), no new Roth investment
2018: no new Roth investment

Thanks in advance!
To fix this, here are the things I think you would have to do. I'm not a tax-preparer. These are just the steps that make sense to me.

File a Form 8606 for 2003, 2004, 2005, 2006, and 2007. Correct Her Form 8606 for 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, and 2016. Send in amended joint returns for 2015 and 2016 (or maybe just 2016?) because they are the only years within the time you can amend. Use the information from the 14 years of corrected Forms 8606 to file these amendments. Pay the taxes and the penalties and beg the IRS for mercy.

Option 2 - make an appointment, go in and get instructions from the IRS on what to do and then do it. It could be different from what I think.

An expensive mistake, yes. But life is full of things that don't go right.
Thank you for the nice response, retiredjg. Yes, she was in a very low tax bracket when she was making the contributions. It's just a huge bummer that we have $35,000 less in Roth than we had thought! At least we have a ways to go until retirement and have time to recover.
Last edited by Galaga on Wed Dec 05, 2018 10:33 pm, edited 1 time in total.

clydewolf
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by clydewolf » Wed Dec 05, 2018 3:40 pm

[
b]2003-2007 maxed out post tax tIRA with Scottrade/TD Ameritrade and thought it was Roth: current account value $34,000
2008-2016 maxed out backdoor Roth with advisor (now with Vanguard): current account value $88,000
2017: old employer 401k rolled over to IRA with advisor (now transferred to Vanguard), no new Roth investment
2018: no new Roth investment

[/b]
Starting with tax year 2003, the OP's wife made a non-deductible TIRA contribution. She should have completed form 8606 for that contribution. The same is true for tax years 2004, 5, 6, 7. You need to complete the form 8606 for each of those years. This would not change the tax bill for any of those years, but would establish a basis in the TIRA.

The maximum contribution for these years would have been a total of $18,000.

For tax years 2008 through 2016 an after tax contribution was made to the TIRA adding to the basis. A form 8606 is needed for each year showing that contribution. Also each year a Roth conversion was made. The pro rata rules will come into play here adding to your tax bill for the respective year. This would require a form 1040-X for each year.

The maximum contribution for these years would have bee a total of $47,000. https://dqydj.com/history-of-contributions-ira-limit/

You may want to seek the services of an Enrolled Agent: https://www.naea.org/state-affiliates-1

She could make a contribution to a Roth IRA for 2018 if she qualifies other wise. It would not impact the situation for years prior to 2017.

retiringwhen
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiringwhen » Wed Dec 05, 2018 3:41 pm

I know this is brain hurt territory, but i think retireddjg’s option 3 is backwards, because there is a ton of pre-tax money in the IRA, you owed a lot MORE tax than you paid on the backdoor transactions. That is the whole reason people rollover IRAs into 401(K)’s so they don’t have to pay the taxes on the pre-tax basis being converted... This is not clean at all.


Secondly, after recent mess ups by Vanguard with our accounts (without details, i will say, stuff like this needs careful attention....), I wouldn’t trust them about the status of the TD IRA. Have you independently verified that it is NOT a Roth 100%? Just checking.

retiringwhen
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiringwhen » Wed Dec 05, 2018 3:43 pm

I agree with the previous poster, you need a tax specialist, this is a nightmare that cannot be ignored.

retiredjg
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiredjg » Wed Dec 05, 2018 3:47 pm

retiringwhen wrote:
Wed Dec 05, 2018 3:41 pm
I know this is brain hurt territory, but i think retireddjg’s option 3 is backwards, because there is a ton of pre-tax money in the IRA, you owed a lot MORE tax than you paid on the backdoor transactions.
You are right. What I said was incorrect about making the back doors correct. I'll fix it. :oops:

retiredjg
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiredjg » Wed Dec 05, 2018 3:53 pm

Galaga wrote:
Wed Dec 05, 2018 3:36 pm
Thank you for the nice response, retiredjg. Yes, she was in a very low tax bracket when she was making the contributions. Option 3 sounds like the easiest course of action. It's just a huge bummer that we have $35,000 less in Roth than we had thought! At least we have a ways to go until retirement and have time to recover.
:oops: What I said was wrong. If she had that theoretical IRA with no basis during the years she was doing the back door Roth contributions, she would owe more tax on each of the back door contributions.

I erased option 3. It will be less confusing to others if you also erase option 3 in the part you quoted.

So sorry.

adam1712
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by adam1712 » Wed Dec 05, 2018 4:21 pm

retiringwhen wrote:
Wed Dec 05, 2018 3:41 pm
...

Secondly, after recent mess ups by Vanguard with our accounts (without details, i will say, stuff like this needs careful attention....), I wouldn’t trust them about the status of the TD IRA. Have you independently verified that it is NOT a Roth 100%? Just checking.
This bears repeating, I would be double and triple checking if you have any original documents that this was opened as a non-deductible traditional IRA or if there's any chance there was a mixup in one of the mergers or transfers.

wfrobinette
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by wfrobinette » Wed Dec 05, 2018 5:09 pm

Galaga wrote:
Wed Dec 05, 2018 10:14 am
My wife thought she had opened a Roth with Scottrade/TD Ameritrade after finishing school but it turns out it was a post tax traditional IRA. She contributed for a few years, we got married, got better jobs, and then got an advisor to help with our finances. He did not manage this tIRA and we all figured it was a Roth. He then helped us with backdoor Roths for a number of years. After leaving a former job she rolled over her 401K into a new IRA, therefore we stopped doing backdoor Roths for her. We have since decided to leave the advisor and are transferring all funds to Vanguard. Of course, Vanguard won't allow transfer of this old Scottrade/TD Ameritrade IRA into Vanguard Roth account. What do we do now!?!?! Did we break the pro-rata rule with all the backdoor Roths? Since she now has the rollover IRA I assume I can't just convert the old IRA to Roth and pay taxes. Here is the breakdown:

2003-2007 maxed out post tax tIRA with Scottrade/TD Ameritrade and thought it was Roth: current account value $34,000
2008-2016 maxed out backdoor Roth with advisor (now with Vanguard): current account value $88,000
2017: old employer 401k rolled over to IRA with advisor (now transferred to Vanguard), no new Roth investment
2018: no new Roth investment

Thanks in advance!
You've got 8 years of potential tax issues here. I would collect all the documentation you can and go see a good tax accountant to get this done right the first time.

Good Luck!

quantAndHold
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by quantAndHold » Wed Dec 05, 2018 7:10 pm

Galaga wrote:
Wed Dec 05, 2018 3:27 pm
Just to be clear, this shouldn't affect her pretax rollover IRA, correct? That is a much larger account and I perish the thought of paying taxes on that account because of this screw up...
Correct. The rollover IRA is not involved, since she stopped doing the Roth conversions once she rolled the 401k into the IRA.

Galaga
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by Galaga » Wed Dec 05, 2018 10:44 pm

adam1712 wrote:
Wed Dec 05, 2018 4:21 pm
retiringwhen wrote:
Wed Dec 05, 2018 3:41 pm
...

Secondly, after recent mess ups by Vanguard with our accounts (without details, i will say, stuff like this needs careful attention....), I wouldn’t trust them about the status of the TD IRA. Have you independently verified that it is NOT a Roth 100%? Just checking.
This bears repeating, I would be double and triple checking if you have any original documents that this was opened as a non-deductible traditional IRA or if there's any chance there was a mixup in one of the mergers or transfers.
Thank you adam1712 and retiringwhen! I looked back at her form 5498 from Scottrade for 2003, 2004, and 2005 and it clearly has an "X" under Roth IRA (section 7) and gives the amount contributed in the Roth IRA section (section 10). However, in 2006 the "X" is under IRA in section 7 and the contribution amount is in box 1 (IRA contribution other). It appears there may have been a clerical error at Scottrade in 2006 which has carried over. We never opened a traditional IRA nor agreed to convert from Roth to tIRA (why would anyone ever do that anyway!?!?!). We have contacted account maintenance at TD Ameritrade. Hopefully they make this right because, if not, it will be quite a headache based on the responses above.

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celia
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by celia » Thu Dec 06, 2018 5:15 am

quantAndHold wrote:
Wed Dec 05, 2018 11:06 am
I’m guessing that the IRS doesn’t know about this IRA, since they never dinged you for taxes before.
Not so. The custodians must report the contributions, distributions, and year-end balance of every IRA every year, even if you never had a transaction on the account that year. This is reported on Form 5498 that you receive each May.

No taxes would be due until you withdrew from it.

I also suggest you correct all the forms since the error began. You can file old 8606s at any time and amend your returns for the last 3 years. A letter of explanation, like you have posted, would also help explain what happened. If there is a penalty for underpayment of taxes, just let them send you the bill, then you can pay it.

Question: How did the Scottrade Roths end up in traditional IRAs?
Galaga wrote:
Wed Dec 05, 2018 10:44 pm
We never opened a traditional IRA nor agreed to convert from Roth to tIRA (why would anyone ever do that anyway!?!?!).
If someone contributed to a Roth then later found out they weren't eligible, they could re-characterize the contribution (and its growth). This is then treated as if the contribution had been made to a tIRA all along.

retiredjg
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiredjg » Thu Dec 06, 2018 7:35 am

Galaga wrote:
Wed Dec 05, 2018 10:44 pm
It appears there may have been a clerical error at Scottrade in 2006 which has carried over. We never opened a traditional IRA nor agreed to convert from Roth to tIRA (why would anyone ever do that anyway!?!?!). We have contacted account maintenance at TD Ameritrade. Hopefully they make this right because, if not, it will be quite a headache based on the responses above.
This is good news indeed! Please let us know how you get this worked out. Surely this is not the first time it is happened. There must be a mechanism to fix it.

exigent
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by exigent » Thu Dec 06, 2018 7:46 am

retiredjg wrote:
Thu Dec 06, 2018 7:35 am
Galaga wrote:
Wed Dec 05, 2018 10:44 pm
It appears there may have been a clerical error at Scottrade in 2006 which has carried over. We never opened a traditional IRA nor agreed to convert from Roth to tIRA (why would anyone ever do that anyway!?!?!). We have contacted account maintenance at TD Ameritrade. Hopefully they make this right because, if not, it will be quite a headache based on the responses above.
This is good news indeed! Please let us know how you get this worked out. Surely this is not the first time it is happened. There must be a mechanism to fix it.
Wow, that is great news, you must be so relieved! I hope they can fix it. What a headache. And scary to think something so catastrophic could occur due to a clerical error. The world needs better clerics. 8-)

kaneohe
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by kaneohe » Thu Dec 06, 2018 7:58 am

Do the monthly statements reflect the incorrect nature of the account? I guess it would have been easier to fix a decade ago?

exigent
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Re: Whoops, thought wife's tIRA was Roth...help!

Post by exigent » Thu Dec 06, 2018 8:16 am

kaneohe wrote:
Thu Dec 06, 2018 7:58 am
Do the monthly statements reflect the incorrect nature of the account? I guess it would have been easier to fix a decade ago?
Clearly. And the best time to plant a tree was 20 years ago. The second best time is now.

retiringwhen
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Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiringwhen » Thu Dec 06, 2018 8:25 am

Galaga wrote:
Wed Dec 05, 2018 10:44 pm
Thank you adam1712 and retiringwhen! I looked back at her form 5498 from Scottrade for 2003, 2004, and 2005 and it clearly has an "X" under Roth IRA (section 7) and gives the amount contributed in the Roth IRA section (section 10). However, in 2006 the "X" is under IRA in section 7 and the contribution amount is in box 1 (IRA contribution other). It appears there may have been a clerical error at Scottrade in 2006 which has carried over. We never opened a traditional IRA nor agreed to convert from Roth to tIRA (why would anyone ever do that anyway!?!?!). We have contacted account maintenance at TD Ameritrade. Hopefully they make this right because, if not, it will be quite a headache based on the responses above.
This is a much better outcome, but still a mess. At least now you will be able to put the problem back on TD.... It will be interesting to see how they resolve the issue. I suspect you will have to be vigilant to get their attention and resolution. I would make a call to the customer service line, register the concern and ask to immediately escalate to their resolution team (or whatever TD Ameritrade calls it). A regular CSR will be almost helpless with type of situation.

I would pull as much documentary history as you have online and in paper and get it all in a organized in a scanned electronic form BEFORE you call them. Barrage them with all the supporting documentation right up front so they cannot brush it off.

In a different error situation when my wife asked, "what happens when you [aka the mutual fund complex] screw up this bad and it doesn't get caught?" His response was, "This is why we have Errors and Omissions Insurance".......

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiredjg » Thu Dec 06, 2018 8:50 am

I think the problem is at Scottrade, not TD Ameritrade, although both will have to contribute something to fix it. There is no way that TDA is going to change that IRA to a Roth IRA without Scottrade agreeing they messed up.

retiringwhen
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Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiringwhen » Thu Dec 06, 2018 9:11 am

retiredjg wrote:
Thu Dec 06, 2018 8:50 am
I think the problem is at Scottrade, not TD Ameritrade, although both will have to contribute something to fix it. There is no way that TDA is going to change that IRA to a Roth IRA without Scottrade agreeing they messed up.
TD Ameritrade bought / merged Scottrade into their business within the past two years. So TD inherited the problem :shock:

retiredjg
Posts: 34397
Joined: Thu Jan 10, 2008 12:56 pm

Re: Whoops, thought wife's tIRA was Roth...help!

Post by retiredjg » Thu Dec 06, 2018 10:30 am

retiringwhen wrote:
Thu Dec 06, 2018 9:11 am
TD Ameritrade bought / merged Scottrade into their business within the past two years. So TD inherited the problem :shock:
Oh. That might make things easier. We hope. :happy

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