Change Brokerage Firms while in a 72t
L1: Change Brokerage Firms while in a 72tI’ve been in a 72t for five years and have five years yet to go before 59 1/2. Can I move my entire IRA from my current brokerage firm to another without complications? Is there a preferred method for doing this?2012-09-20 22:16, By: Clay, IP: [220.127.116.11]
L2: Change Brokerage Firms while in a 72tYes, you can move it. There are some risks if you did a partial transfer, but moving the entire IRA to another custodian should not be a problem.
You should move the account by a direct trustee transfer. The advantages of a direct transfer are:
1) These are not reported to the IRS. There is no 1099R or 5498 issued and this attracts less attention from the IRS.
2) Your one rollover per 12 months is preserved for emergency use to correct an error where you received too much and need to roll the excess back to the IRA.
2012-09-20 22:55, By: Alan S, IP: [18.104.22.168]
L3: Change Brokerage Firms while in a 72tAlan:
I agree with your response but with one exception; the move will generate a Form 5498 from each custodian.
Each year custodians generate Form 5498 for each IRA account they hold. In this case the losing custodian will show an ending year value of zero ($0.00) and the gaining custodian will show the end of year value.
Bottom line is generation of Form 5498 is a “non-event” as far as the IRA account owner is concerned. Personally I think this form could be eliminated completely but then you know that government actions never go away.
Jim F2012-09-21 13:22, By: Jim F, IP: [22.214.171.124]
L4: Change Brokerage Firms while in a 72tJim… they will never eliminate it, that’s how the IRS tracks funds. If they ever get their computer systems up to date (and may they have) the information on the 5498 validates the information filed on the 1040 and also gives them the total account value.2012-09-21 13:26, By: Gfw, IP: [126.96.36.199]
L5: Change Brokerage Firms while in a 72tGood morning Gordon:
You’re right about the form never going away and their computer systems not being up to date. I just think the data from the years of generating Form 5498 has been going into a “black hole” of data banks. I’m sure that eventually their computer systems will “grow up” and be able to effectively use the data.
Jim F2012-09-21 13:31, By: Jim F, IP: [188.8.131.52]
L6: Change Brokerage Firms while in a 72tJim,
When an IRA to IRA transfer is done there should not be either a 1099R or a 5498. You may be thinking about the 5498 generated on an employer plan to IRA direct rollover, where both a 1099R and a 5498 are required.
From the IRS 5498 Inst, p 15:
“Do not report on a Form 5498 a direct trustee to trustee transfer from a) a traditional IRA to another traditional IRA or to a SEP IRA, b) SIMPLE IRA to another SIMPLE IRA. c) SEP IRA to another SEP IRA or to a traditional IRA, or d) a Roth IRA to another Roth IRA. For reporting purposes, contributions and rollovers do not include these transfers.”2012-09-21 17:19, By: Alan S, IP: [184.108.40.206]
L7: Change Brokerage Firms while in a 72tHowever, trustees “must furnish copy B of form 5498 to IRA owners showing the ACCOUNT VALUE as of December 31”.
I believe that the contribution and/or rollover information may not appear in the case of the trustee-to-trustee transfer, but the form is still required to report the valuation. The IRS is supposedly using the form to check the proper reporting of Contributions, Rollovers, and possibly Conversions, as well as the existence of the accounts.
FYI, the designation of “NON-DEDUCTIBLE IRA CONTRIBUTIONS” is not made on the 5498, nor even on the basic 1040. It can only be shown on the form 8606, which should be attached to the 1040, but can be filed separately at any time, with no 3 year statute of limitations, with appropriate supporting documentation.2012-09-21 17:36, By: dlzallestaxes, IP: [220.127.116.11]
L8: Change Brokerage Firms while in a 72tAlan:
We’re really both right.
While the 5498 may not specifically document the movement of IRA funds for a Trustee-to-trustee transfer, each custodian will generate the form. Like DLZ said, the custodians are required to report end of year valuations and that’s what I was referring to.
I still think it’s a dumb report since, atleast currently, the service apparently doesn’t have a good tracking system for the data furnished on the Form 5498. More data for the perverbial “black hole.”
Jim F2012-09-21 20:46, By: Jim F, IP: [18.104.22.168]