Inaccurate account activity.

L1: Inaccurate account activity.I received an additional retirement distribution on12/15/03. When these funds were sent to the broker who handlesmy accounts that were part of my 72T package, they indavertently placed the funds in one of those accounts, showing the funds as a rollover. While the funds were not placed into the account where my distribution originates, they were placed into one of the additional accounts with balances comprised in my original plan.
The funds were taken out of this erroneous account in January of this year and placed into a correct third account as I want these funds to be totally segregated.
My question is: Since these funds were erroneously placed into an account that is part of my 72T agreement and subsequently moved out, does this cause a problem?2004-01-13 12:48, By: jeepg, IP: [24.238.67.182]

L2: Inaccurate account activity.Hello jeepg:
You are sufficiently vague that it israther difficult to provide a correct answer. However, let me give you some examples that may help:
(1) You rollover your 401(k) account in mid-December to a rollover IRA in the amount of exactly $1,000,000. The $1mm earns interest in the IRA of $188.00 for the balance of December. On 12/31/xx the account balance is $1,000,188.00 & accordingly you use this balance tho compute a SEPP plan distribution amount for the year. Two months go by into the new year and you have already made a distribution and low and behold, another check arrives for $626.88 from your old 401(k) plan administrator. Further, supposedly, the extra $626.88 is attributable to: accounting error, late dividends, accrued interest, your proportionate share of a settlement, etc., etc.
Where do you put the money? Right into the same account as the original $1mm. These types of entries / amounts are all rightfully treated as “earnings” in the broad sense of the word. They were always owned by the account; they just took a while to show up. Further, one should instruct the new rollover IRA custodian to account/record the $626.88 as earnings, not another rollover contribution.
(2) You have additional earned income and decide to make a IRA contribution & inadvertently the IRA custodian sticks the $3000 in your rollover IRA, not your contributory IRA; however, it takes 2 – 3 months to finally spot the error. In this case, the $3000 must come out of the rollover IRA and transferred to your contributory IRA. Futher, proportionate earnings must also be transferred from the rollover to the contributory IRA; albeit a relatively small amount.
Admittedly, these are polar examples and I suppose there are lots of circumstances in the middle.The key is to look at the character of the transaction & decide accordingly. Hope this helps.
TheBadger
wjstecker@wispertel.net

2004-01-13 13:52, By: TheBadger, IP: [38.116.134.130]

L2: Inaccurate account activity.For The Badger: I follow your logic in example 1 that the $628 is “earnings” and not more “Rollover” money. However, how does the loosing custodian code it anything other than a “TTTT?” My experience with custodians is they are not allowed to think and have to follow a lawyer-approved matrix for coding distributions, and they only have three choices … “normal,” “early” or “TTTT.”2004-01-13 14:27, By: Jim, IP: [68.1.147.61]

L2: Inaccurate account activity.I”m sorry for the confusion. Let me try again. I have been taking 72T distributions for several years. When my 72T plan originated, I used the the balances from two accounts to determine the amount of the distributions, even though the actual distribution comes out of only one accout.
In December, I received another pension payout and the funds were erroneously placed into one of my 72T accounts, ( the account that does not pay the 72T distribution). As my instructions to the brokerwere to place this new pension distribution into a third account, once the broker realized their mistake, he moved these funds into a brand new account.
Is this considered to be a modification to my original plan, even though it was the brokers error, and has been rectified? My concern is that my 2003 yearly statements submitted to the IRS will show this as a rollover going into one of my original 72T accounts and then a correcting entry taking the funds out and placing them into a new zaccount.2004-01-13 14:39, By: Jeepg, IP: [24.238.67.182]

L2: Inaccurate account activity.The Badger will probably give you a more definitive answer, but let me try this. My experience has been that if you can get the custodian to make corrections before submitting theirreports to the IRS, then you don”t have to worry. Sounds like you will get 1099-Rs for the distributions and then the Form 5498 will show the new money coming into a new IRA account.
Jim2004-01-13 14:55, By: Jim, IP: [68.1.147.61]

L2: Inaccurate account activity.Jim,
Thanks for the response. I agree with you that the custodian should correct the entries prior to them being disseminated. That would certainly avoid any problem. They are taking the stance that they would not have to correct the entries and just reporting the transactions as they occurred would be ok. They would be willing to provide a letter to the IRS if anything was questioned, however, I don”t want the IRS to question anything at all in the first place,2004-01-13 15:01, By: Jeepg, IP: [24.238.67.182]

L2: Inaccurate account activity.OUCH ! That”s a scary response from the custodian!
I would ask them for the letter NOW and don”t wait till there is a problem with the IRS. Do you have the date and time andthe name of the person you talked with at the custodian when they promised the letter? Don”t wait. Get with the program now to document how the error occurred.
1099-Rs have to go out to individuals by Jan 31, but the custodian does not send their report till I think it is mid February. And the Form 5498 which reports additions, distributions and end-of-year values does not have to go out till sometime in May. I have received corrected Form 5498s well after the May date.
Jim2004-01-13 15:13, By: Jim, IP: [68.1.147.61]