Rollover Check deposited in Reg. Bank Acct in error
My Client completed forms to have her 401K accumulation rolled over to an IRA, but in error, deposited the check in her regular bank account.
What is the best way to fix this…just right a check to her IRA and deposit it or something else.
Thanks,
Gerry
Permalink Submitted by Robert Wright on Thu, 2007-11-01 19:17
Yes, but remember to add the 20% federal withholding to the amount deposited into her checking account if your client doesn’t want that 20% withholding considered a distribution.
Permalink Submitted by BruceM on Thu, 2007-11-01 20:57
Was this a direct transfer, or done via check?
If direct, simply contact the bank, explain the situation and they should be able to reverse it and redirect to the TIRA account #. There shouldn’t be a 60 day time requirement, but I’d suspect its going to need to occur quickly, and any assoicated income (interest) needs to be held in the taxable account and treated as part of its normal income distribution for the year.
If this was intended to be an agent-to-agent transfer, and so a check was cut to the client’s IRA, then you don’t have a 20% withhold nor a 60 day rollover period. It should be as easy as going to the bank, having them reverse the deposit and redirect the exact dollar amount to the client’s IRA, assuming they are at the same institution.
If this was a withdrawal rollover and the check made out to the client,, then the amount will have to be reversed out and redeposited into the IRA account within the 60 day period, along with the 20% withheld, to ensure none of it is to be treated as ordinary income for the year.
BruceM