Basis Isolation Failed Due to Liquidation Occuring after Jan 1
So, the basis was converted and the remaining balance was to be rolled out to a qualified plan by year end. Due to late processing, the money didn’t actually leave the TIRA until Jan. 7th. Is it possible to have the 5498 reflect a zero balance because that is what should have happened, but didn’t only due to processing delays? – m
Permalink Submitted by Alan - IRA critic on Wed, 2019-04-10 16:19
The custodian won’t change the 5498 unless possibly they were 100% in error. It is not clear how many days of lead time were provided, but requesting a time specific transaction near the year end holidays typically includes a risk of not getting done by year end. No harm in asking them however. I suppose the consequence of this is a mostly taxable conversion instead of a non taxable conversion.
Permalink Submitted by [email protected] on Wed, 2019-04-10 21:45
posted in other thread as well, but I just realized the other implication is that since the balance was sent to qualified plan in Jan. of this year, it appears an ineligible contribution occured due to the remaining basis that was in the rollover. How does this get fixed? -m
Permalink Submitted by Alan - IRA critic on Wed, 2019-04-10 22:18
Good point. The employer should be notified of the after tax amount transferred and the employer then needs to distribute that amount plus allocated earnings back to the employee per RR 2014-9. The employer 1099R issued will probably be coded E (EPCRS distribution). SInce the IRA basis was not eligible for rollover to the employer plan, I believe that the basis was distributed from the IRA (despite the G coded 1099R from the IRA) and could be rolled back if within 60 days using any funds available and if the one rollover limitation does not prevent it. The code E distribution should be non taxable except for earnings.
Permalink Submitted by [email protected] on Thu, 2019-04-11 13:57
much appreciated. Looks like client would have to self-certify due to beyond 60 days. otherwise, all else seems straighforward. -m