Direct transfer of IRA funds by wire from trustee to trustee

Submitted by Sheryl Dobbins on Sat, 2019-02-09 14:32

We did a direct wire from IRA at Vanguard to Navy Federal Credit Union IRA. Wiring instructions were: “This is a Direct Transfer FBO Sheryl Dobbins”. Navy Federal received the funds and confirmed the funds were entered on their end as a direct transfer.

Got a call from our Vanguard representative who stated he was checking whether the wired IRA funds might NOT be coded correctly on the 2019 Vanguard 1099-R, with box 7, letter G (direct transfer).

Please give your thoughts on this.



Submitted by William Tuttle on Sat, 2019-02-09 15:11

  • A trustee -> trustee transfer should be directed to an eligible account, not just the individual.
  • The above transfer could be a taxable transfer to a taxable account
  • Should ideally be “FBO Individual, IRA account #.


Submitted by Alan - IRA critic on Sat, 2019-02-09 15:54

VG does not appear to know what they did. There is no 1099R if an IRA to IRA transfer is done. A 1099R with a code G indicates a direct rollover to a qualified plan. Start by determining if this money is actually in your NFCU IRA or not and ask them if they considered this to be a non reportable transfer, meaning no 5498 will be issued. As spiritrider indicated, the wire instructions were not complete if “IRA” was not included. If the funds are in the IRA now, then you will have to make a copy of your NFCU statement and send it to VG making a case that they do NOT issue a 1099R based on an IRA to IRA direct transfer. VG may not comply and issue a 1099R showing a distribution, code 1 or 7. Before making further recommendations, please update what you find out from NFCU and confirm if your wire instructions omitted reference to an “IRA”.



Submitted by Sheryl Dobbins on Sat, 2019-02-09 22:28

My error above. The exact wire instructions for VG were: “IRA Direct Transfer, FBO John Smith” and the funds were wired into my NFCU IRA.  Spoke to Navy Federal CU and they confirmed that the wire received from VG will be not reportable and was coded as a direct transfer on the Navy Fed side. VG seems to think that because Navy FCU did not “pull” the funds from the VG IRA there might be some issue on the VG side. The rep sent  the issue to the resolution team to confirm it will be coded NOT as a distribution. The VG rep was concerned that the issue revolves around the wiring of funds to Navy IRA rather than having Navy pull the funds.  Thanks for your help. We will make a copy of our first Navy IRA statement and get it to VG. Any other thoughts, please feel free.  



Submitted by David Mertz on Sat, 2019-02-09 17:46

  • Code G would be correct if the Vanguard account was part of a qualified retirement plan like a 401(k).  If the account at Vanguard was truly an IRA, no Form 1099-R should have been issued and Vanguard will need to issue a corrected Form 1099-R showing $0 distributed.
  • Even though Vanguard did not follow good practice and omitted “IRA” from the payee listed on the check, as long as the check was deposited directly into the new IRA and was not first deposited into a nonqualified account, the movement of the money should still qualify as a trustee-to-trustee transfer.


Submitted by Sheryl Dobbins on Sat, 2019-02-09 22:37

The transfer from Vanguard IRA to Navy Federal IRA was done Jan, 2019. Our error… the exact verbiage did state  on the wire instructions:” IRA Direct Transfer, FBO John Smith”.  This was not a check sent. This was a wire transaction from VG IRA to Navy IRA and that is what VG wants to make sure it is still a trustee-trustee transfer. Our VG rep called yesterday to say they have to check this because the money was wired, not pulled. Please advise and thanks



Submitted by Alan - IRA critic on Sun, 2019-02-10 04:22

It doesn’t matter that it was wired, it is still a direct transfer and VG should not issue a 1099R. VG also could have issued a check with this same payee on the check and sent it to you for delivery and that also would be a direct transfer.  The key is that the check or instrument not be made payable to you individually, but rather to your IRA FBO you. Surely, VG will eventually agree with this and code this correctly so a 1099R will not be issued.



Submitted by Sheryl Dobbins on Sun, 2019-02-10 16:55

Thanks so much for the info. I’ll be on the phone with VG tomorrow am. I’m so pissed. They have been making some BIG mistakes recently. Scanning errors abound for incoming checks. I also attached the instructions for the 1099-R for 2019 that clearly states exactly what you’ve been saying. Thanks again



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