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I made a contribution to a Rollover IRA for Tax Year 2003. I did not realize that you are not suppose to put in "new" funds into a Rollover IRA.
So, now Im wondering if its really a big deal.

Technically, I'm allowed to open a Traditonal IRA, deposit 2 grand, and then roll it into my Rollover IRA.

What I did was just put 2 grand into my Rollover and skipped the middle process.

Anyone know the details on what I could be facing?

Well... NOW they're going to get you.

Depends. You could call the tax office and let them know and *possibly* avoid some nasty repercussions, or they might even correct it for you.

Then again, they could nail you to the wall for a BS mistake.

TrailerParkJawa wrote:I made a contribution to a Rollover IRA for Tax Year 2003. I did not realize that you are not suppose to put in "new" funds into a Rollover IRA.
So, now Im wondering if its really a big deal.

Technically, I'm allowed to open a Traditonal IRA, deposit 2 grand, and then roll it into my Rollover IRA.

What I did was just put 2 grand into my Rollover and skipped the middle process.

Anyone know the details on what I could be facing?

*Ahem* Echelon. You're screwed. [size=0]No, not really.[/size]

TrailerParkJawa wrote:I made a contribution to a Rollover IRA for Tax Year 2003. I did not realize that you are not suppose to put in "new" funds into a Rollover IRA.
So, now Im wondering if its really a big deal.

Technically, I'm allowed to open a Traditonal IRA, deposit 2 grand, and then roll it into my Rollover IRA.

What I did was just put 2 grand into my Rollover and skipped the middle process.

Anyone know the details on what I could be facing?

With a spiky dildo they found in verilon's closet.
j/k

My understanding is that it is highly unlikely that they'll actually audit you, and if they do and they catch the error, you pay up and pay a fine or something.

If you're worried, the thing to do is call a tax lawyer and ask about the worst case scenario. My suspicion is that they won't notice and it won't be that bad if they do.

It's a criminal offense, isn't it? That means they must show beyond a reasonable doubt that you intended to defraud the government. There's no way they can meet that standard for an isolated error like this.

Actually in the case of taxes the burden of proof is on you to prove your innocence.

This definatly qualifies as a minor 'oops' type tax mistake, and is highly unlikely to draw the ire of the IRS down upon you. Even if they did notice they would be unlikely to actual come after you as the potential profit for the gov't is negligable compared to the expense of the man hours needed in order to even haul you in for an audit. However , if by some fluke you happen to be one of the several thousand random audits done acoss the nation each year the worst that will happen is that you will have to pay some back tax and a small fine, you will not end up in pound-em-in-the- ass-prision over 2g's in a RolloverIRA.

Darth Wong wrote:It's a criminal offense, isn't it? That means they must show beyond a reasonable doubt that you intended to defraud the government. There's no way they can meet that standard for an isolated error like this.

No offense, Wong, but this is the US IRS. They have no sense of humor and they can levy some hefty fines without resorting to a judge - even for an unintentional mistake.

TrailerParkJawa you've got a couple choices here. You can

- ignore the problem. It's true, you are unlikely to be audited and after I think either 5 or 7 years the statute of limitations runs out and you're off the hook. However, do not run for public office in the meanwhile, and be aware that if you ARE audited you'll likely have to pay a find of some sort, plus interest.

- consult a tax lawyer to investigate fixing the goof. This may be as simple as filing an ammended tax return. It may be more complicated than that.

In the past, I did some goofs on my taxes. In one case, the IRS wrote me a letter saying, essentially, "Thanks for paying your taxes. Don't ever do that again. Here's your refund." However, in that case they owed me money, not the other way around. A significant difference. I'm the sort that's inclined to 'fess up and fix, but that's me.

Please choose wisely.

Embracer Of Darkness wrote:Don't worry about it, I don't pay tax.

I'm a UK student type though, so nobody cares.

And if you're in Scotland, the goverment pays you!

Basically Broomstick is spot on.

Either ignore and hope they never catch it.

or

Get an EA to look at it and see about getting it ameneded.

And an EA is an Enrolled Agent...the people who legally can represent you in tax court. Though fee range from 120-1000, depending on severity as well who.

Why the hell are you doing your own taxes, anyway? That's like a double red flag for an audit.

Once upon a time, it was considered perfectly normal and proper for the average citizen to do his or her own taxes - you do realize that?

I can even remember when that was true.... and you could usually get them done in an hour or three. >sigh<

I have serious issues about how society is starting to require experts for everything. I can't wait for the day someone starts dictating to me how I wipe my ass after a shit.

With that, I will confess that I pay someone to do my taxes for me - but then, my spouse is self-employed, I live in one state and work in another, and I occassionally pick up free-lance work. So my situation is more complicated than average. Also, Mr. Tax Preparer does such a good job that I still come out money ahead even after I pay his fee.

Ah, the joys of being a college kid making 5-6k a year and being able to use the good ole 1040ez.

Melkor wrote:Ah, the joys of being a college kid making 5-6k a year and being able to use the good ole 1040ez.

How'd you get away with that??? I've had to do the 1040 for the last couple years, and I don't graduate until next year.

TrailerParkJawa wrote:I made a contribution to a Rollover IRA for Tax Year 2003. I did not realize that you are not suppose to put in "new" funds into a Rollover IRA.
So, now Im wondering if its really a big deal.

Technically, I'm allowed to open a Traditonal IRA, deposit 2 grand, and then roll it into my Rollover IRA.

What I did was just put 2 grand into my Rollover and skipped the middle process.

Anyone know the details on what I could be facing?

You gonna pick the soap in prison for this shit.

Arthur T: I did my own taxes this year because they are normally not so complicated. And if I had realized a Rollover was only for certain circumstances I would have opened a Traditional. I doubt I'm alone in making this mistake. Anyway, I kinda pride myself in knowing as much as I can about my own finances. Unfortunately, part of the learning process includes making mistakes.

Thanks to everyone else for your input, I was thinking of actually giving the IRS a call, but now that it is done, I don't know what , if any real trouble I'd be in. Since, had I done the 1 extra step, the net effect to my taxes is all the same.

But you know, if I go to prison I still plan on posting here now and then.

TrailerParkJawa wrote:I made a contribution to a Rollover IRA for Tax Year 2003. I did not realize that you are not suppose to put in "new" funds into a Rollover IRA.
So, now Im wondering if its really a big deal.

Technically, I'm allowed to open a Traditonal IRA, deposit 2 grand, and then roll it into my Rollover IRA.

What I did was just put 2 grand into my Rollover and skipped the middle process.

Anyone know the details on what I could be facing?

Avoid penalties and fines by asking for an extension (it is very close to April now) and filing a form 1040X Amended Return. It's the same as the 1040, but allows you to make corrections and, of course, consider consulting an accountant for what you could potentially face if you really want something to worry over and how to avoid it in the future.
You can find the necessary forms here.

TrailerParkJawa wrote:Arthur T: I did my own taxes this year because they are normally not so complicated. And if I had realized a Rollover was only for certain circumstances I would have opened a Traditional. I doubt I'm alone in making this mistake. Anyway, I kinda pride myself in knowing as much as I can about my own finances. Unfortunately, part of the learning process includes making mistakes.

Thanks to everyone else for your input, I was thinking of actually giving the IRS a call, but now that it is done, I don't know what , if any real trouble I'd be in. Since, had I done the 1 extra step, the net effect to my taxes is all the same.

But you know, if I go to prison I still plan on posting here now and then.

Yeah you can get to do the wonderful 1040X...and the IRS will go eh.

Okay for an interesting hint for anyone who has hard taxes...ie Broomstick's level and beyond(Jawa you have what I lovably call average...some stuff, but nothing too extreme, and easy enough after a few years barring any giant changes). Do them late in the year.

Seriously the IRS becomes rather lax the later you do them...which is why I still have clients who have THE worst stuff, come in around November.

Ghost Rider wrote:
Yeah you can get to do the wonderful 1040X...and the IRS will go eh.

Okay for an interesting hint for anyone who has hard taxes...ie Broomstick's level and beyond(Jawa you have what I lovably call average...some stuff, but nothing too extreme, and easy enough after a few years barring any giant changes). Do them late in the year.

Seriously the IRS becomes rather lax the later you do them...which is why I still have clients who have THE worst stuff, come in around November.

The funny thing is, what would I ammend? The money is already in the account. To do the right thing, I'd have to sell the stock. Take the money out, incurr penalties, then create a new IRA, put the money into that IRA, and then roll it over into the original account.

I suppose technically, I could sell all my stock and convert this IRA into a Traditional IRA. But then I'd still being selling some stock I don't want to sell.

Had I done the correct thing and contribute to a regular IRA the gov't would still be out 400 bucks in taxes from me. So, its not like I'm cheating them, I simply made an error of procedure.

TrailerParkJawa wrote:

Ghost Rider wrote:
Yeah you can get to do the wonderful 1040X...and the IRS will go eh.

Okay for an interesting hint for anyone who has hard taxes...ie Broomstick's level and beyond(Jawa you have what I lovably call average...some stuff, but nothing too extreme, and easy enough after a few years barring any giant changes). Do them late in the year.

Seriously the IRS becomes rather lax the later you do them...which is why I still have clients who have THE worst stuff, come in around November.

The funny thing is, what would I ammend? The money is already in the account. To do the right thing, I'd have to sell the stock. Take the money out, incurr penalties, then create a new IRA, put the money into that IRA, and then roll it over into the original account.

I suppose technically, I could sell all my stock and convert this IRA into a Traditional IRA. But then I'd still being selling some stock I don't want to sell.

Had I done the correct thing and contribute to a regular IRA the gov't would still be out 400 bucks in taxes from me. So, its not like I'm cheating them, I simply made an error of procedure.

Then just have an EA look at it. You might not have to do anything until next year.

Some actually don't charge to see if something is wrong, but it'll give you peace of mind.