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Ineligible Roth contribution

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  • Ineligible Roth contribution

    My previous financial advisor made an ineligible Roth contribution of $5500 to my account in 2015 that was just discovered by me in Jan 2017. He did backdoor Roth in both 2013 and 2014 but decided for no reason to contribute directly in 2015, when my income was above the limit. The deadline to remove excess contribution (Oct 2016) has already passed. I have to pay the 6% excise tax penalty for 2015, 2016, and 2017, which totals to be $990. I already amended the 2015 return and paid the $330 and will the rest when the time comes.

    I contacted the financial advisor asking for reimbursement since this was not my mistake. Three weeks later, they hired a lawyer to request from me via email an IRS bill of the $990. The fact is I don't have this "bill", which for 2015 will come later, and maybe much later for 2016 and 2017. I am being honest for paying this penalty.

    Is this their way of getting away with not paying for the penalty? Should I just forget about trying to get a financial advisor to pay for his own mistake? Can they retaliate for my complaining about the brokerage firm/advisor?

    Thanks so much! This is so stressful. First time posting. The WCI site is the reason I started paying more attention to my finances and stop working with a financial advisor that only picked mutual funds with ER of 1 to >2% on top of 1.3% fee.

  • #2
    Bro. Srsly. Fire the fool. (imo)

    Would showing them the completed form 5329 for excess contribution payment (with corroborating 5498 showing that year's contribution and your 1040 showing your income to be in excess) suffice? Seems like evidence enough to me.

    Don't let those tools intimidate you.


    • #3
      Ouch dude that really sucks

      I'm not sure how the legal stuff works so hopefully others can chime in.

      We all seem to have a time point where our "personal financial awakening" occurs.  Luckily, this mistake, although inconvenient and annoying, will not do THAT much damage to you in the long run.



      • #4
        One good reason to do things yourself for sure. At least you can screw things up yourself.
        Helping those who wear the white coat get a fair shake on Wall Street since 2011


        • #5
          Thanks guys for the replies.

          I have been going back and forth with the lawyer for weeks. The advisor was fired long ago because of poor service. I did some recalculation and the correct amount I owe IRS is $660 instead of $990. I showed them the tax forms and what 2 CPAs calculated. They refused to admit it is their mistake/liability only wanted to pay me $330 as an "accommodation", sign a settlement agreement with ridiculous wording, and send them a W-9 so I have to pay taxes on the $330. I filed a complaint with FINRA, which did not do anything. I think I spent enough time on this and decided not to pursue it any further. It is hard to win against the 'big boys'.

          Yes, personal financial awakening it is!


          • #6
            If you got a day to waste take them to small claims court. The firm will have to pay the attorney more than the claim is worth and they will usually just cave in at that point. Obviously, taking a day off of work to go do this might be more of a loss to you than just walking away.