IRA Rules

Posts Tagged ‘finance’

Question: Do exitsting contracts remain valid after a corporate merger or buyout?

My bank was bought out by another bank. The new entity claims that rules regarding my IRA are no longer valid. Specifically, there will be interest penalties for moving my IRA to a different institution when there were no penalties in the previous agreement. What takes precedence, the existing contract or the new rules? I signed no agreements after the merger/buyout.

Answer: The new rules generally apply. Best bet is to call the Banking Regulatory department for the state where you live.

Banks are very highly regulated and they can easily have their licenses revoked or fined if they do anything illegal.

IRA fees, checking account fees, etc can pretty much be changed at any time, with proper notice to the account holder

Question: How do you resolve a bank tax reporting error for a qualified distribution from a Roth IRA?

I took a qualified early Roth IRA distribution as a first time homebuyer in 2006. What happens if my bank incorrectly codes this transaction as non-qualified? Will the IRS understand what actually happened?

Answer: The bank will assume you made a distribution from your Roth IRA period. It is up to you to justify to the irs that it is not taxable. You do this by filing the proper forms with your tax return (attached to it)

5329 This tells the IRS that you are or are not subject to the 10% early withdrawal penalty because you are under 59 1/2 or why you are exempt if you are a first time home buyer taking out up to $10,000

8606 (page 2, part III lines 19-25) This tells the IRS how much of the distribution is basis reduction and how much is taxable income.

Do not forget on a roth, you get your basis back then you have taxable income, unless you contributed the funds in the last 5 years. First time home buys can take $10,000 off

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