Bank neglected to convert to RothIRA.
I filled out application at bank to convert existing traditional IRA to ROTH IRA.I paid the additional taxes for the next 4 years.But it is still a traditional IRA.I have carbon copies of the application/paperwork and copies of tax returns for the 4 relevant years.Is it possible,after all these years,to have this conversion completed?
Permalink Submitted by Alan - IRA critic on Tue, 2021-04-27 15:05
You can try, but the bank will likely resist due to the time passed. They will say that you should have brought this to their attention at the time of the requested conversion. How will you prove that you actually mailed or delivered the form to the bank? And why would you pay taxes without a 1099R reporting a distribution, and over 4 years instead of one? If you have good evidence of the request and valid response to these questions, then it may be worth retaining an attorney to pressure the bank into a settlement of some form. Tax years still open for amended returns for a refund are 2017 till 5/17/21, and 2018-2020.
Permalink Submitted by David Mertz on Tue, 2021-04-27 15:59
The tax was optionally payable over 4 years if the conversion was done in 1998. If the conversion was intended to have been done in 1998, it’s likely impossible to correct this now; too late to amend the relevant tax returns.
Permalink Submitted by Thomas Hand on Tue, 2021-05-04 21:05
Yes,it was in 1998.
Permalink Submitted by Thomas Hand on Tue, 2021-05-04 21:29
After paying additional taxes as a purchase toward ROTH ,is it not owed as fulfillment of a debt?
Permalink Submitted by Alan - IRA critic on Tue, 2021-05-04 21:40
There are two issues here. The taxes paid for the Roth conversion that you never got cannot be recovered. The other question is whether you can have the TIRA retitled as a Roth IRA after 23 years. As indicated earlier this is also impossible unless you have enough evidence of custodian error to make spending 20k for a private letter ruling (PLR) a worthwhile endeavor. Of course, the amount of the conversion and what the conversion would have now been worth is also an indicator whether it is worthwhile to pursue a PLR. You do not get the 20k back whether the ruling is favorable or unfavorable.
Permalink Submitted by Thomas Hand on Tue, 2021-05-04 21:58
After paying additional taxes as a purchase towards ROTH,is it not owed as fulfillment of a debt?
Permalink Submitted by Thomas Hand on Tue, 2021-05-04 22:52
What department within the bank should be contacted to try to have this retitled?Should a formal complaint be initiated ?My main concern is the amount of tax I will have to pay on future withdrawals,which would be more than 20k.Would a complaint to New York State Dept.of Financial Services and/or the Office of the Comptroller of Currencies help?
Permalink Submitted by William Tuttle on Tue, 2021-05-04 22:59
You do not have a debt, you had a tax overpayment.
It was your responsibility to pay attention and verify successful completion of the Roth conversion at the time.
Bottom line: The tax code and the IRS have a Statute of Limitations on a claim of refund. This is the latter of three (3) years from filing or two (2) year from when the tax was paid.
After the SOL, there is no debt owed. You are literally SOL with regards to the overpayment of taxes.
In case you didn’t know, civil debts are also subject to state SOLs. A taxpayer/debtor has a limited time to recover the overpayment/debt.
Permalink Submitted by Bruce Steiner on Wed, 2021-05-05 15:34
Have your lawyer check to see whether Sections 1311 et seq. might help.