I took regular ira dist. I went to anothr bank & made a new IRA. I ask for curr. yr contrib. I already had a rollover this yr. They coded as a dir transfr.Need I worry?

[dmertz]

"I took a regular distribution" and "they coded as dir transfer" are contradictory.

Was there a check issued by the old custodian?  If so, was the check made out to you or was it instead made out to your new IRA for your benefit?  If there was no check issued, how was the money moved?

[judyblumling]

Ck was payable to me.  I carried the ck to the new bank. I'm not eligible for rollover so I asked for current yr contribution. I've brought it to their attention telling them a ck payable to me isn't a direct transfer. They disagree and won't change the coding

[judyblumling]

Thank you. You’ve been very helpful

[dmertz · Accepted solution]

I see.  If you escalate, you should be able to get them to change the coding since you are doing this well before the April 15 deadline for making contributions for 2018.  You need to deal with the bank personnel in the back-office IRA department, not the branch employees.  At the time of the deposit it should have been clear to the new custodian that this could not have been a direct transfer because the receiving bank was not being presented with a check from the old custodian made out to the new custodian for your benefit.  Bringing this to their attention might change their mind.

With the new custodian treating this as a direct transfer they will not show a regular contribution or a rollover contribution on a 2018 Form 5498.  In the absence of a regular contribution appearing on Form 5498, there's a chance that the IRS will question your reporting of the new contribution on your tax return.  If that happens you'll need to explain to the IRS that the new custodian mistakenly coded it as a trustee-to-trustee transfer.

Hopefully you are not subject to an early-distribution penalty on the distribution from the old custodian and you have sufficient compensation to avoid the new contribution being an excess contribution.

Given the circumstances, it probably would have been better to just deposit the money into a Roth IRA as a Roth conversion contribution.  Roth conversions are disregarded with respect to the 1-rollover-per-12-months rule.  You would owe taxes on the conversion (the traditional IRA money will be taxable someday anyway) and growth in the Roth IRA would eventually be tax free.