Can I get withholdings refunded. During a Traditional to Roth IRA conversion in December the investment firm took 10% withholding when instructed NOT to.

[donc62629]

The firm claims rules for 945-X  say they cannot refund the withholdings into the Roth.  Are they correct?

[macuser_22]

They are correct.  They cannot refund money already sent to the IRS.    If you did not replace the tax withheld with other funds when you converted (which you could have), then only the 1099-R box 1 minus the withholding was converted.

Enter the 1099-R and the box 4 withholding will be applied to your tax return to offset your tax liability or add to your refund - same as a refund of the withholding.

[donc62629]

macuser_22  Thank you but please note that I requested NO withholding and  see Title 26 - Internal Revenue  Part 31  31.6413(a)-3
Repayment by payor of tax erroneously collected from payee

<a rel="nofollow" target="_blank" href="http://tinyurl.com/y5wb93to">http://tinyurl.com/y5wb93to</a>

[macuser_22]

Good luck with that.

[dmertz]

§ 31.6413(a)-3 does not apply.  § 31.6413(a)-3 applies to erroneous "backup withholding."  The amount withheld from this distribution is not backup withholding.

[donc62629]

dmertz > my mistake... when reading "Broker".  When / how does form 945-X come into play?

[macuser_22]

Form 945-X is an amended 945 form filed by the payer that did the withholding if the amount reported on form 945 was not the amount actually withheld.   That has nothing to do with the 1099-R withholding.

I don't know why you are worried about it since the 1099-R box 4 amount will be refunded to you when you file your 2018 tax return.

[dmertz]

If you did not substitute for the amount withheld any other monies to complete the Roth conversion of the entire distribution, the amount withheld for taxes is an amount distributed to you and not converted to Roth.

You could potentially complete a late rollover back to the traditional IRA of this amount under Revenue Procedure 2016-47 due to financial-institution error, but it would be up to the financial institution to accept your self-certification that the circumstances would qualify for a waiver:  <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-drop/rp-16-47.pdf">https://www.irs.gov/pub/irs-drop/rp-16-47.pdf</a>

[donc62629]

Thanks to all...seems like I am SOL.  

[macuser_22]

About what?   You will get the box 4 tax refunded when you file the tax return.

[donc62629]

macuser_22  I had the xx,xxx dollars set aside to pay the taxes. The 10% they took can now Never be placed in the ROTH.  10-15+ years of tax free potential earning on it is GONE!

[dmertz]

You have the potential to get the money back into a traditional IRA and subsequently convert it to Roth in 2019 or later if the financial institution will accept the late rollover back into the traditional IRA of the money withheld for taxes as I described in my previous comment.  If you have documentation to support your assertion that you requested that nothing be withheld for taxes, it seems reasonable that this could be considered financial-institution error.  With such documentation, it the financial institution should be willing to accept that they made a mistake and accept the rollover.  Such a late rollover will be reported with code SC in box 13c of the 2019 Form 5498 from the traditional IRA.  The portion rolled over late would be reported on your 2018 tax return as an amount rolled over.

[macuser_22]

Your original question was can you get the withholding "refunded", not if the withheld amount could still be placed in the Roth and you might be able to using the method dmertz described.

[donc62629]

macuser_22  & dmertz   Are you saying it might be possible for me to write a check and have the institution put in back in the Traditional IRA?  If they are willing to do so.

[macuser_22 · Accepted solution]

Exactally - it is worth a try - refer to the link dmertz gave you <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-drop/rp-16-47.pdf">https://www.irs.gov/pub/irs-drop/rp-16-47.pdf</a>