dmertz
Level 15

Retirement tax questions

"TDAmeritrade told me what to do to move the ROTH monies, and had me set up a Rollover IRA account which I did."

 

As I understand it, this transaction in 2021 was intended to roll money from the designated Roth account in your 401(k) held as TDAmeritrade over to a Roth IRA held at TDAmeritrade, but it was instead deposited into a traditional (rollover) IRA at TDAmeritrade.  Because a traditional IRA is not eligible to receive a rollover from a Roth account, this constitutes an excess contribution to the traditional IRA.  The excess contribution is subject to penalties on your 2021, 2022 and 2023 tax returns.

 

While TDAmeritrade/Schwab might be able to correct this as a bookkeeping error and avoid this having been an excess contribution to a traditional IRA, if they can't, the corrective action necessary is to obtain a distribution from this traditional IRA equal to the amount deposited, then request that TDAmeritrade/Schwab accept these funds as a late rollover to a Roth IRA, pursuant to IRS Rev. Proc. 2020-46, of the original distribution from the designated Roth account in the 401(k), with the reason being financial institution error.  (Such a transaction performed entirely in house should never have been allowed to happen by TDAmeritrade.)

 

https://www.irs.gov/retirement-plans/accepting-late-rollover-contributions