transferring money from an IRA acct into a new IRA acct. with a check

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piton
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transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

[2019 thread bumped in 2021 --admin LadyGeek]

hi - I want to transfer money from an IRA(vanguard) into a new IRA(at a bank) with a check from my vanguard IRA account. I have a roth and a traditional at vanguard, both set up with checks.

I thought that transferring to an IRA at a different institution would be easier with a check (it is, and it's faster), but am I getting myself into any trouble here? I haven't taken possession here as far as I can see, so my understanding is that I could do this as much as I want to. But I'm not completely clear on this.

I would appreciate any help on this. thx
retiredjg
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by retiredjg »

Welcome to the forum.

I don't recall seeing this question before. I'm not sure what the answer is, but am interested in hearing if others have done this.

If the check is made out to your IRA at your bank, that is considered a direct transfer. I suppose, but do not know for sure, since you are the one writing the check you can make it out to whoever you want.

You do NOT want to take possession of the money. I'm curious how you could have check writing privileges on an account that is supposed to withhold taxes (unless you are older than 59.5).
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anon_investor
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by anon_investor »

If the check coming from your old IRA is written to the new IRA (e.g. new IRA company FBO your name), then you technically are never taking possession of the funds, just the physical check to pass to the new IRA company. However, with Vanguard, you can have them mail the check directly to the new IRA company (if they allow for this). I just did this when I rolled my TIRA from Vanguard into my employer's 401k. You just have to make that selection on Vanguard's IRA distribution form. You never want to have a check written from your IRA directly to you, since that triggers a bunch of rollover timing rules, etc.
mhalley
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by mhalley »

My understanding is that this is more prone to errors than a trustee to trustee transfer. You only have 60 days, taxes can be withheld, etc. I can’t see how it would be faster, but I guess it could be. https://finance.zacks.com/transfer-ira- ... -4023.html
Here is the process:p from Zacks:
.Obtain the forms to open an IRA at the new institution. The IRA application requires your name and contact data, Social Security number and date of birth. Initial contribution amount and investment selections may also be required. On the beneficiary designation form, name the person or persons to whom you want the funds to go after your death. Sign the paperwork and submit it to the new bank or brokerage.
Get in touch with your original trustee and tell the institution you want to make a transfer. Moving all the IRA money means closing the original account. You may need to fill out account closing paperwork and pay a fee, depending on the rules of the institution.
Ask the trustee to make out a check for the transfer amount to the new trustee. Provide the full legal name of the new institution to the original trustee for this purpose.
Walk in or mail the check to the new financial institution as a contribution to your new IRA. If you use mail, use certified mail with a return receipt. The check has to be posted to your new IRA account within 60 days of its receipt to avoid taxes and penalties.
Check with your new trustee to see that the transfer has taken place.
Last edited by mhalley on Wed Jul 03, 2019 11:34 am, edited 2 times in total.
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vineviz
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by vineviz »

piton wrote: Wed Jul 03, 2019 10:46 am I thought that transferring to an IRA at a different institution would be easier with a check (it is, and it's faster), but am I getting myself into any trouble here? I haven't taken possession here as far as I can see, so my understanding is that I could do this as much as I want to. But I'm not completely clear on this.
I suspect it will not be easier to do what you propose.

Vanguard is going to consider (and report to the IRS) any checks you write as a distribution/withdrawal. What they would do automatically as part of a bank-initiated rollover process to avoid that reporting, you will have to do yourself when you file your taxes for 2019.

Personally, I would not be interested in transferring an IRA from Vanguard to a bank that made that process in the least bit difficult. I've never rolled over or transferred an account that required anything more than a notarized 1 or 2 page form (and a bank should provide that notary service for free). And it's hard to imagine what genuine advantage an IRA at the bank has over an IRA at Vanguard.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

Thanks for all of the input. To answer a few questions:
1. I'm more than 59.5

2. I did this once and made the check out to the bank with FBO, so I don’t see how that could be construed to be in possession of the money, but hopefully will not be an issue for TY-2019!

3. It takes at least a week and extra paper work to do the trust-to-trust check. With an online application at the new bank I can get approved and overnight the check and the account will be opened within days. So it's definitely easier and it avoids wondering where "things" are in the process or if "something" got stuck somewhere. I feel more in control.

4. Other banks/credit unions have much better CD rates than Vanguard, so that's why the switch from Vanguard

5. Part of the reason for wanting to move more quickly is that CD rates move quickly and I want to get the best rate if I'm locking in at 5 or 6 years
cas
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by cas »

piton wrote: Wed Jul 03, 2019 10:46 am
I thought that transferring to an IRA at a different institution would be easier with a check (it is, and it's faster), but am I getting myself into any trouble here? I haven't taken possession here as far as I can see, so my understanding is that I could do this as much as I want to.
As far as I can glean from reading the relevant IRS forms/instructions (1099-R, Form 5498), from the IRS' point of view, I don't think the issue is any parsing of semantics on the exact meaning of "possession". From the IRS point of view, if the sending institution issues a 1099-R (coded as a withdrawal), then the only way to get the money back into an IRA is using the 60-day rollover method (with its "only once per 365 days" limitation).

And I'm pretty sure that any sending institution's computer is going to regard the act of you writing a check as a reason to issue a 1099-R coded as a withdrawal. How are they going to know differently? I'm sure there aren't human beings carefully reading each check and making a determination "Oh. He/She made it out to a "bank FBO him/herself" so this is really intended to be a trustee-to-trustee transfer. Make a note not to issue a 1099-R." (The Form 1099-R instructions say NOT to issue an 1099-R in the case of a trustee-to-trustee transfer.)

Then, an additional bit of trickiness is that the receiving institution has to code the Form 5498 as a rollover, which generally means that some sort of form specifically designating the check as being a (60-day) rollover has to accompany the check. Plus you need to keep a copy of that form (and check) so that you can argue the point in case your Form 5498 shows up the next tax year in May incorrectly showing that you made a contribution rather than a rollover.

This "but if I use a check I never had possession" situation has been brought up on the forums multiple times in the context of HSAs (and how to most efficiently get funds from an employer's choice of HSA to the new individual Fidelity HSA.) Yes, the personally written check method is (usually) faster than a trustee-to-trustee transfer. But it is a 60-day rollover, with the accompanying 365-day restriction and necessity that neither the sending nor receiving institution bungle their respective 1099-R/Form 5498. (1099-SA/5498-SA if it is an HSA.)

Or so it looks to me after reading the Form 1099-SA/Form 5498-SA instructions-to-custodian. 1099-R/5498 look equivalent to me. I'm not an expert. Hopefully one of the forum subject matter experts on rollover IRS details (Alan S., SpiritRider) will be along.
Alan S.
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Alan S. »

piton wrote: Wed Jul 03, 2019 2:37 pm Thanks for all of the input. To answer a few questions:
1. I'm more than 59.5

2. I did this once and made the check out to the bank with FBO, so I don’t see how that could be construed to be in possession of the money, but hopefully will not be an issue for TY-2019!

3. It takes at least a week and extra paper work to do the trust-to-trust check. With an online application at the new bank I can get approved and overnight the check and the account will be opened within days. So it's definitely easier and it avoids wondering where "things" are in the process or if "something" got stuck somewhere. I feel more in control.

4. Other banks/credit unions have much better CD rates than Vanguard, so that's why the switch from Vanguard

5. Part of the reason for wanting to move more quickly is that CD rates move quickly and I want to get the best rate if I'm locking in at 5 or 6 years
There are two issues here:
1) Whether the IRS considers this a TtoT transfer
2) Whether VG and the bank both process the check as a TtoT transfer.

To my knowledge the IRS has not clarified if a IRA owner checks are considered as a direct transfer from the custodian. While in Notice 2007-7 they DID clarify that a QCD check written by the account owner was to be treated as issued by the custodian, that is a special situation and it is risky to project this ruling to a non QCD check.

TD Ameritrade's check writing agreement clearly states that all checks written on their IRAs will be treated as distribution (1099 issued). I didn't locate VG's agreement.

If you already did this earlier this year, call VG and ask them if a 1099R will be issued. If they say yes, ask them why they do not consider this a non reportable transfer since the funds moved directly between IRA accounts without your possession. When you get the answer, check with the receiving bank whether they will issue a 5498. They shouldn't unless they considered this a rollover. If you get either a 1099R or a 5498, that presents the appearance to the IRS that you did a 60 day rollover. You do not want to get into this debate with the IRS, so you need to secure assurance from the two custodians that they both agree to treat this as a non reportable transfer.

If you do not get that assurance, certainly do NOT do another such check because that would be your second 60 day rollover which is not allowed within 12 months of the prior distribution. The second check would then become taxable to you and an excess contribution to the bank IRA.

Personally, I don't think this is worth the risk or the hassle. Even if you get assurance from the two custodians that they will treat this as a transfer (and the IRS will not even see it), that does not mean that this will actually come to pass if the transaction gets sent to their tax Depts. Another posted commented on this very risk.

If you decide to make those calls, please post back their response. Chances are good that you cannot even get a rep to understand the issue or provide a confident answer.
retiredjg
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by retiredjg »

Alan S. wrote: Wed Jul 03, 2019 8:11 pm Personally, I don't think this is worth the risk or the hassle.
I think I'd rather do it the old fashioned way. :happy
Spirit Rider
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Spirit Rider »

I agree with retiredjg and Alan S (the authority here).

It does not really matter whether you are ever in possession of the funds or not. What matters is how does the source custodian report it. It is not truely a trustee -> trustee transfer if they don't know about it.

Given the volume, I would think that IRA custodians consider all check writing to be a distribution and automatically reported as such on Form 1099-R. It is not like anyone is reading the "pay to" line on every check.

It would then be considered a 60-day rollover, would have to be reported on your Form 1040 and would be subject to the one IRA rollover per twelve month rule.
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piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

@ Alan S. - If it turns out to be a 60 day rollover, and as in this case the money went into a new plan basically instantly, would this be unusual, or more to the point would it be difficult to straighten out on my taxes (in case you know)? btw, not planning on doing this again :-)
Alan S.
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Alan S. »

piton wrote: Thu Jul 04, 2019 12:55 pm @ Alan S. - If it turns out to be a 60 day rollover, and as in this case the money went into a new plan basically instantly, would this be unusual, or more to the point would it be difficult to straighten out on my taxes (in case you know)? btw, not planning on doing this again :-)
As long as you have a rollover available, you would just report this on line 4 of Form 1040 like any other rollover. This is very simple. There would be no tax impact and no additional forms necessary. Of course, you would be locked out of doing another 60 day rollover for 12 months from the date of the distribution you rolled over earlier. That is why you should not try to do another of these, at least until that year passes.

The general advice is always to move IRA money by direct transfer, leaving your one rollover for a true emergency.
Topic Author
piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

update:
I contacted both banks.
- bank-A coded it as a "distribution" and did not withhold any taxes
- bank-B coded it as a "transfer".

I think it will end up being an indirect rollover tax-wise. Do you agree?
Alan S.
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Alan S. »

piton wrote: Fri Jul 05, 2019 1:13 pm update:
I contacted both banks.
- bank-A coded it as a "distribution" and did not withhold any taxes
- bank-B coded it as a "transfer".

I think it will end up being an indirect rollover tax-wise. Do you agree?
Yes. Bank A will issue a 1099R that the IRS will expect to see reported. Moreover, since Bank B is treating this as a transfer they will not issue a 5498 reporting a rollover contribution. That combination has the potential of the IRS asking you to prove that you actually did a rollover since they might doubt your rollover reporting. So in some respects this is worse than BOTH treating this as a distribution and rollover.

Now, suppose that you did not have a rollover available and the reported distribution was large. In that case, your only recourse would be to take this up directly with the IRS and provide them proof that you actually did a transfer and that the 1099R should never have been issued. The proof would be a copy of your check and a copy of the receiving bank's statement showing the contribution in the same amount. I think the IRS would accept your documentation, but who knows? If you do have the rollover available, I would just report it as a distribution and rollover and be sure not to do this again for at least 12 months.
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BL
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by BL »

I would ask my bank to do a "pull" from Vanguard ASAP to the account (IRA) you set up. Hopefully they would do it and might credit you with the money even before you receive it. Sorry, I have only gone the other way, V pulling from bank, or PenFed pulling from bank, so don't know how this specific bank "pull" would work.

I would never deliberately fool with the IRS!
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by pkcrafter »

bank-A coded it as a "distribution" and did not withhold any taxes
Bank A is the "sending bank? It would seem to me that if they coded it as a distribution, whey would withhold taxes. If the transfer arrives and taxes have been withheld you must replace that money. Sounds like it might be a mess in the making. If taxes where not withheld, then it probably was considered a transfer.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Topic Author
piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

I think this is related, so I'm not starting a new thread:

I'm eligible (old enough) to take an "in-service withdrawal" from my 401K plan (at fidelity). I want to do a "direct-rollover" to Vanguard (my IRA). I spoke to a fidelity csr and they said they would issue a check made out to Vanguard Fiduciary Trust company, but that they would send it to me and then I would send it to Vanguard. Fidelity assured me that it would be coded as a "direct-rollover" and no taxes would be withheld.

Is there a limit on direct-rollovers?

Is there anything wrong with this picture.

I appreciate the guidance!
Last edited by piton on Mon Jul 08, 2019 8:55 am, edited 1 time in total.
Spirit Rider
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Spirit Rider »

Direct rollovers from an IRA to an IRA are almost always done by a check payable to the new IRA custodian and mailed to the account owner for forwarding. The only time a check can become an indirect rollover is when a distribution check is made out to and deposited or cashed by the account owner.
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by pkcrafter »

Piton: I want to transfer money from an IRA(vanguard) into a new IRA(at a bank)
I would not recommend you invest through a bank. It's very likely you will be charged an ongoing fee by the bank as well as the fund company. If the funds arrive at the bank with taxes missing, you will have to replace them. No bank, no check transfer. Use a custodian to custodian transfer to a low cost fund company.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
mhalley
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by mhalley »

I wouldn't jump through all these hoops just to get a few basis points on a CD.
Alan S.
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Alan S. »

piton wrote: Mon Jul 08, 2019 8:37 am I think this is related, so I'm not starting a new thread:

I'm eligible (old enough) to take an "in-service withdrawal" from my 401K plan (at fidelity). I want to do a "direct-rollover" to Vanguard (my IRA). I spoke to a fidelity csr and they said they would issue a check made out to Vanguard Fiduciary Trust company, but that they would send it to me and then I would send it to Vanguard. Fidelity assured me that it would be coded as a "direct-rollover" and no taxes would be withheld.

Is there a limit on direct-rollovers?

Is there anything wrong with this picture.

I appreciate the guidance!
There is no limit on direct rollovers by the IRS, but it is possible that your 401k may have a limit. What Fidelity told you is correct.

Are you aware that you can purchase FDIC insured brokered CDs in your IRA brokerage account at Vanguard? And when you do you do not have a move funds between banks or IRA custodians or fill out forms at every new bank. Any and all brokerage CDs are held in your existing brokerage account. I second what the other poster indicated regarding bank investments. You are better off where you are, and that would avoid the potential rollover issues from writing an IRA check to another custodian.

I think that if you do write an IRA check that Vanguard will probably report it as a distribution, but treat your check as an indication that you did not want any withholding on the distribution. For any other TIRA distribution, the default withholding rate is 10%, but you can decline withholding or increase the rate above 10% if you want to.
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piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

@Alan S. - I would love to get a CD at Vanguard, but the brokered CDs that I looked at seem to have a stipulation that those CDs can be "broken" on the whim of the issuer? I might not be phrasing this correctly, but if I want a 5 year CD, I don't want to have the feeling that they can back out of it whenever they want to. What is your opinion about that.

re: fidelity - It's a 401k and I'm extremely limited in what I can choose, so I like to "cash out" occasionally so that I can do whatever I want without the ridiculous company restrictions. I worked at one company that allowed the 401k to be in a brokerage account, but that's unusual in my experience.
cas
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by cas »

piton wrote: Tue Jul 09, 2019 9:55 am @Alan S. - I would love to get a CD at Vanguard, but the brokered CDs that I looked at seem to have a stipulation that those CDs can be "broken" on the whim of the issuer? I might not be phrasing this correctly, but if I want a 5 year CD, I don't want to have the feeling that they can back out of it whenever they want to. What is your opinion about that.
Obviously I'm not Alan S., but...

What are you looking at on the Vanguard brokered CDs that makes you think they can be broken on the whim of the issuer?

I buy Vanguard brokered CDs for some elderly relatives, and in my experience it is rare for the new-issue brokered CDs to be callable. For secondary market CDs, I'll admit I put "no" next to the "Callable" item on the search form, so I don't know how common it is for the secondary market CDs to be callable. Seem to be lots of non-callable secondary market CDs available though.

Or are you looking at some item in the description besides whether the CDs are callable?
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piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

Sorry in advance if this is a repeat of the discussion!

This idea of transferring via a check written on an IRA account, is it different for a "traditional" vs a ROTH, where taxes have already been paid? I wouldn't do it for a traditional, but I'm wondering about a ROTH.

Thank you!
Spirit Rider
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Spirit Rider »

piton wrote: Fri Jul 12, 2019 1:06 pm This idea of transferring via a check written on an IRA account, is it different for a "traditional" vs a ROTH, where taxes have already been paid? I wouldn't do it for a traditional, but I'm wondering about a ROTH.
Doesn't matter whether this is a traditional IRA or Roth IRA. A check written on an IRA account would almost certainly be reported by the source custodian as a distribution and a rollover by the destination custodian. You would have to report this on your tax return as a rollover and you would use up your one per twelve month period limit for all IRAs (traditional, SEP, SIMPLE and Roth). Only trustee - > trustee IRA transfers are non-reportable and unlimited.
sfRonH
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by sfRonH »

(non-professional discussion)
Most of the comments on this topic treat how the financial institutions report things as being the equivalent of the law, of the tax code. I say the tax code should determine how financial institutions report things, not the opposite. Financial institutions have oversights, errors, and outdated systems. I worked for a major financial company for 28 years.

This said, I want to believe that a check drawn on an IRA account, made payable to a new custodian of an IRA, would be considered a Direct Rollover, not an Indirect Rollover, and not subject to taxation nor to the 60-Day Rule, nor to the Once Per 365 Days Rule.This case is similar to that of the sending financial institution issuing a check to the new institution, then mailing it directly to the customer, who then delivers it to the new institution. This case is allowed an unlimited number of times, with no 60-Day Rule.

I have done this as well, and I will report it as a Normal Distribution but as non-taxable. I have copies of the checks that show the funds crossed directly from one financial institution to the other, and not through my non-IRA accounts.
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piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

Well, here I am in 2021 and I just got a letter from the IRS saying there is an unaccounted difference on my return, for the exact amount of the IRA I opened at GTE with my Vanguard IRA account check. I believe that's because GTE didn't send anything to the IRS but Vanguard did.

I have a copy of the front side of the Vanguard check to GTE, written by me on my Vanguard IRA account and I have the GTE statement showing the funds used to open the IRA.

I wrote Vanguard to get a copy of the back side of the check (endorsement), but so far they said I have to contact "the contr". Not sure what that is and they didn't give any contact info. Seems a little cryptic, but anyway, it's still in progress.

I wrote and asked GTE for a form 5498, but they said they couldn't since they recorded it as a transfer. I haven't actually spoken to anybody at GTE, but I'd be happy with a 5498 that just listed the FMV when I opened the account and check off the IRA box . Is that unreasonable?

I had no idea that this wouldn't go smoothly when I did it, mainly because I didn't realize that Vanguard would list any check written on my IRA account as a distribution. Well, I get it now. If there was a warning, I didn't see it. Anyway...

I hope that it goes as smoothly as how @sfRonH has described it. Really, I don't feel that I did anything "wrong". We'll see...
Lionel Hutz
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Lionel Hutz »

You should seek professional tax assistance if you haven’t already. If we’re talking about a 2019 transaction, generally speaking institutions won’t edit their books this far back (ie Vanguard won’t change to a trustee transfer; GTE won’t change it to an indirect rollover and generate a 5498).

I really hope this doesn’t end up turning into a taxable distribution due to the inability to marry a 5498 with the 1099-R code 7. But see what the tax professional can do.

Vanguard should be able to get you a copy of their paid check, press them further.

GTE should hopefully be able to generate some sort of confirmation to record the money entering the IRA, as a possible lesser substitute for the 5498.

Again this is not tax advice, but maybe you prove the 60 indirect rollover with all these elements.
retiredjg
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by retiredjg »

Did you report it as a rollover on line 4 of your tax return? Even if not taxable, the rollover must be shown on your return.
lakpr
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by lakpr »

@piton,

I had a very similar issue when I rolled over a Rollover IRA to my current 401k plan, when I was trying to clear the decks for Backdoor Roth. The IRA custodian did report the amount of rollover as distribution. An year and half later IRS contacts me and said I owe some $50k in taxes and eat distribution penalties. I responded to that CP-2000 notice showing the distribution from the IRS custodian (I still have a Roth IRA account there, so I could access past statements), and also monthly statements from the 401k plan showing a clearly marked "Rollover balance" in the exact amount of the distribution from the IRA, and wrote a letter explaining the rollover.

IRS accepted that letter and sent another note back (in about 6 weeks) that all is good and no taxes or penalties due.

Hopefully it would be as smooth for you as it was for me. Looks like you have the documentation to support your actions, send it in.
Last edited by lakpr on Wed Aug 11, 2021 9:01 am, edited 1 time in total.
Alan S.
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Alan S. »

OP - apparently there is no issue with the one rollover limitation, at least you did not mention it.

If all clear there, all you should need to do is secure a copy of the distribution month statement from VG and from the new custodian. It should show a rollover contribution of the same amount that the 1099R showed as a distribution. Send copies to the IRS, and after a considerable backlog delay, they should accept your documentation of a valid rollover and rescind any tax due notice.

Trying to get revised matching forms from the two custodians will not happen, but if you cannot access those statements from 2019, you will have to request them from the custodians. Not only amounts, but dates are also important to the IRS to back this out.

Technically, this is a non reportable direct trustee transfer, so there should have been no 1099R, however with check writing perhaps VG's processing platform is not set up to recognize an owner written transfer check, and as I indicated two years ago, the IRS has not clearly addressed the issue either.
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piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

Alan S. said, "apparently there is no issue with the one rollover limitation"
that's correct
retiredjg said, "Did you report it as a rollover on line 4 of your tax return? Even if not taxable, the rollover must be shown on your return."
yes, I did, but apparently, since VG sent a 1099-R and the IRS got nothing from GTE, that took precedence and the IRS wants more. cold comfort

TY for all the help, really appreciated! - I'll post the results with a hopefully happy ending!

fyi: researching the transaction at VG (the check in question), it turns out that you can pull up a copy of the endorsed check! Not sure why the CSR didn't know to point me there. Seems like it becomes continually harder working with VG to get information and help.
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piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

Anyone have experience with a response from a CP2000 to IRS? (CP2000 is the IRS form that accompanies the documentation explaining why I don't owe the taxes since it was not a distribution.)

I faxed the CP2000 response form to the IRS over a month ago with "eight-by-ten color glossy photographs with circles
And arrows and a paragraph on the back of each"

Do I have to call them to check? I hate to wake a sleeping dog! Just not sure if I can expect a response from them.
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piton
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by piton »

After one month, I got confirmation (USPS) that they got my documents and that they would now take up to 90 days to research the information that I gave them. Happy that they let me know they got the FAX!
Alan S.
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Alan S. »

Piton, do you have written provisions regarding your IRA check writing that addresses how checks you write are reported? Further, do they refer to account transfer checks specifically?

Custodians are pushing check writing for certain IRA owners, especially those who make multiple QCDs each year.

For those wishing to avoid the reporting uncertainty, unless the custodian specifically states in writing that account transfer checks will not be treated as distributions, I would avoid check writing to transfer funds to a different IRA account. Conversions should be OK since they must be reported in any event and do not count against the one rollover limitation.
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celia
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by celia »

While waiting for a conclusion here (which is likely to be that the IRS accepts your ‘proof’), I’d like to point out that you don’t want more than $250k in the IRA when it is held at a bank. That is the FDIC limit on their insurance for bank accounts. This assumes there is only one account owner (which an IRA has) and there is only one beneficiary.
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celia
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by celia »

Alan S. wrote: Thu Sep 23, 2021 8:22 pm For those wishing to avoid the reporting uncertainty, unless the custodian specifically states in writing that account transfer checks will not be treated as distributions, I would avoid check writing to transfer funds to a different IRA account. Conversions should be OK since they must be reported in any event and do not count against the one rollover limitation.
This makes no sense to me. I can imagine a retiree writing checks for rent and food. Of course, those should be reported as distributions!

And I don’t expect the custodian to have to/be able to read the check. Illegible checks abound and even checks written to a financial institution could be for credit card bills, mortgage payment, or car loans. If we want low custodian and bank fees, we need to allow the computers to process all the checks written each day.

ALL CHECKS written against an IRA need to be considered distributions, by definition!
Retired Bill
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Re: transferring money from an IRA acct into a new IRA acct. with a check

Post by Retired Bill »

You need to stop writing a check on an IRA account and think that means it is a transfer to another IRA even if it has the name of another financial institution on it or FBO along with the name. At best you have done a 60 day rollover and that needs to be reported on your income tax return when filed. If you now have received a CP2000, and you did rollover the funds within 60 days, then send IRS a very clear explanation of exactly what happened and copies of the monthly statements showing the distribution from the one IRA and the statement of the new IRA where the funds were deposited. I always liked to highlight the name of the account showing "IRA", the account number, the date of the transactions, and the amounts of the copies sent to IRS to make it as easy as possible for the IRS to follow. And thank them for their time and consideration.

Going back to that check, how would the party that issued the check (Vanguard) know you rolled it over in the 60 day period allowed? It could have set on you desk for 90 days as far as they know. How would they know whether the check even got put into another IRA account? Maybe it got applied to a bank loan FBO you or some taxable account at the new financial institution. Just do the trustee-to-trustee transfer and minimize potential problems.
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