IRA Institution (Merill) Cannot Code Deposit as 60 Day Rollover

Submitted by needHelpWithRoth t3_125xvbj in personalfinance

Hello reddit. I contributed the maximum amount for 2023 and then took an early distribution today into my personal checking account and now want to put that money back into the Roth (perform an indirect rollover). I called Merrill and asked them to pull the distribution amount back into the Roth and code it as a 60 day rollover. But they told me that they can only pull it in by coding it as a contribution. I am worried that this will put me over the contribution limit for the year and result in an annual penalty so I tried to get them to code it as a 60 day rollover. They told me that they couldn't do it and told me to go talk to Bank of America and have them initiate the transfer as a 60 day rollover. When I called BoA, however, they told me they had no idea what was going on and sent me back to Merrill.

Does anyone know which institution does the coding for the 60 day rollover? Is it the IRA instution (Merrill) or is it the transfering instution (Bank of America? Should I be talking to Merrill or to BOA?!

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Thank you

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plowt-kirn t1_je6kvyx wrote

Call back.

Don't discuss the fact that you pulled the money out of the IRA and are putting it back. Only say you want to do a 60 day indirect rollover and ask them how to do it.

If they still refuse to help you, I'd put the money into a different brokerage and then consolidate at some point in the future.

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needHelpWithRoth OP t1_je9331q wrote

Thanks for encouraging me to call back! They told me I had to either write Merrill a check or do a wire transfer from the Bank of America side. Did the wire transfer... hopefully it works out. I will call Merrill again tomorrow to make sure that the transfer is coded correctly as an indirect 60 day rollover. This has definitely been a learning experience, I feel like I know more than most associates at Merrill about indirect 60 day rollovers now haha.

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nowindowsjuslinux t1_je6j654 wrote

I have never heard of doing a rollover back into the same IRA. Always to another IRA.

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needHelpWithRoth OP t1_je6kigg wrote

yeahhhh I messed up. evidently for Roths you are allowed to indirect rollover back into the same account.

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sciguyCO t1_je6wcru wrote

It's a thing. The IRS somewhat considers all your IRAs as one big amorphous lump, regardless of what institution that total is spread across. Ok, one big lump with two sub-lumps (Roth and Traditional).

As long as they see money come out of that lump that gets returned into the lump within 60 days, it's an indirect rollover. Whether the deposit actually goes into a different IRA or the same one doesn't matter to them. It apparently does matter to Merril.

I've seen some people talk about using this as a risky way to get a short-term "loan" from their IRA. Take money out to pay off whatever emergency happened. Then within a couple of months, scrounge up the same amount of dollars and do a rollover deposit back into the same IRA. The IRS just sees the indirect rollover and you incur no tax or penalty (or use up your contribution amount if done with a Roth IRA). But like I said, it's somewhat risky, especially with Traditional IRAs where if the rollover deposit doesn't happen you get hit with tax + penalty. And you are only allowed to execute an indirect rollover once every 12 months (so not something to do everyday). But it is an option that is within the rules.

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needHelpWithRoth OP t1_je93ayb wrote

Thanks for providing background and the explanation! So what you are saying is that the Merrill coding actually doesn't matter to the IRS? If Merrill calls the deposit a "contribution" and this puts me over the annual contribution limit, the IRS can do the math and see that a lump some of money came out and then went back in within 60 days so they automaticaly know it is an indirect rollover?

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sciguyCO t1_je9ticu wrote

I was just talking through why the IRS allows an indirect rollover that ends up in the same IRA the money was originally removed from.

AFAIK, the coding of a "rollover deposit" vs. "contribution" is still important to the IRS, and is something that needs to get properly done on Merril's side. Each year, your IRA provider generate a Form 5498 to report all the contributions made into that IRA for a given tax year. There are separate boxes on that for "IRA contribution", "Rollover contributions", "Roth contribution", etc. If the money you're depositing now ends up included in the "IRA contribution" box for your 2023 5498, then things will get tricky. I'm not sure if that's something that can be retroactively corrected, either with the brokerage or how you report details on your tax return.

I'm also not familiar with Merril's processes, so can't really offer much help on how to get them to do what you want. Sounds like you're making progress, so all I can offer is wishing you good luck.

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