roth contribution in stock (in error) - how to fix? | Ed Slott and Company, LLC

roth contribution in stock (in error) - how to fix?

someone had company stock that vested (non qualified account). The stock was held at a transfer agent (computershare). The stock was supposed to be sold and the proceeds sent to the Roth IRA custodian.

In reality, the stock wasn't sold and the shares were transferred into the roth. Roth contributions are supposed to be in cash. Any idea on how to fix this?

If they transfer agent and custodian could simply reverse the transaction and do it the proper way it would be fine, but each company is sayings its the others problem.

From a tax return / reporting perspective, any ideas on how to fix this? or continue to push the companies to get it reversed / corrected on their end?

Roth custodians know that any regular contribution must be in cash, so they probably coded this as a rollover, thinking that it was sourced to a qualified plan. Either way it's an excess contribution to the Roth IRA which must be corrected by removal. The person first needs to determine what type of equity compensation plan acquired these shares. I do not know whether the contribution to the IRA constitutes a sale or not, but if not the excess contribution correction should be in kind with cash added if there were any gains in the overall Roth account while these shares were in the Roth. The shares can then be handled as they would otherwise have been and a cash contribution to the Roth can be made, but only for 2022 as it is too late to make a 2021 contribution. 

 

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.
 

I agree to the terms and services:

You may review the terms and conditions here.