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Moving IRA CDs from bank to bank
Old 02-18-2014, 09:26 AM   #1
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Moving IRA CDs from bank to bank

I have two IRA CDs maturing at a local bank next week (one's a Roth and one is traditional.) I plan on closing the accounts and rolling them over to Fidelity, where I have found that I can get better rates, and am consolidating everything as it matures anyway.

I know that I can just ask for cashier's checks, made out to Fidelity (or even to me), hand them over to Fidelity, and then come tax time just write "rollover" on the appropriate line of the 1040 page 1. That way the IRS knows there was no "distribution" or income generated.

Does anyone know if TurboTax (or other software) makes this this easy -- since its all on-screen, and you can't "write rollover" anywhere. I know I can do a bank-to-bank transfer (no checks), but in my experience that has been a big hassle (not for Fidelity, but for the bank officer.) Appreciate any thoughts.
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Old 02-18-2014, 10:20 AM   #2
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I think rollover should be cover by the 1099-R form, box 7, probably is code "G"

http://www.irs.gov/pub/irs-pdf/i1099r.pdf
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Old 02-18-2014, 11:09 AM   #3
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I went through this a few years ago and can give you one piece of advice. Do it through Fidelity and have them handle the transfers. Of course your bank(s) will have to be involved but use the custodial method and you keep your fingers off the money. Depending on your circumstances, once you handle the money, you could get involved with a tax situation, like it being deemed a redemption of the CD's. I know people who have done it themselves without problems, but it's better to do a custodial transfer. I'm sure others will chime in here with different opinions.
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Old 02-18-2014, 11:51 AM   #4
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Originally Posted by JOHNNIE36 View Post
I went through this a few years ago and can give you one piece of advice. Do it through Fidelity and have them handle the transfers. Of course your bank(s) will have to be involved but use the custodial method and you keep your fingers off the money. Depending on your circumstances, once you handle the money, you could get involved with a tax situation, like it being deemed a redemption of the CD's. I know people who have done it themselves without problems, but it's better to do a custodial transfer. I'm sure others will chime in here with different opinions.
And isn't there a rule about only touching the money once per year? For example, if the OP took the money over to Fidelity and then for some reason took it somewhere else within 12 months, the second move would be deemed a withdrawal.

I would let the big boys handle it and stay out of it.
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Old 02-18-2014, 12:17 PM   #5
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Originally Posted by JOHNNIE36 View Post
I went through this a few years ago and can give you one piece of advice. Do it through Fidelity and have them handle the transfers. Of course your bank(s) will have to be involved but use the custodial method and you keep your fingers off the money.
+1

If you do it through Fidelity, your tax forms will all show up with the funds shown as a rollover. I recently moved money from a 401k to an IRA at Vanguard. No direct rollover was possible. I ended up getting a check made out to Vanguard at my address. I sent this check with a form printed out on line to deposit it at Vanguard. I went smoothly.
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Old 02-18-2014, 04:10 PM   #6
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If you do it through Fidelity, your tax forms will all show up with the funds shown as a rollover. I recently moved money from a 401k to an IRA at Vanguard. No direct rollover was possible. I ended up getting a check made out to Vanguard at my address. I sent this check with a form printed out on line to deposit it at Vanguard. I went smoothly.
This is good to know. I just did the same thing today with the same players, from Fidelity to Vanguard. Fidelity is sending me a check payable to Vanguard FBO (for benefit of) which I then send to Vanguard.

I can see why Fidelity doesn't want to send it anyplace other than the address of record.
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Old 02-18-2014, 05:22 PM   #7
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Originally Posted by JOHNNIE36 View Post
I went through this a few years ago and can give you one piece of advice. Do it through Fidelity and have them handle the transfers. Of course your bank(s) will have to be involved but use the custodial method and you keep your fingers off the money. Depending on your circumstances, once you handle the money, you could get involved with a tax situation, like it being deemed a redemption of the CD's. I know people who have done it themselves without problems, but it's better to do a custodial transfer. I'm sure others will chime in here with different opinions.
Have done it both ways. More comfortable, doing the rollover, with out touching the IRA funds.

I usually have an "IRA savings acct/ money mkt acct, at both
institutions.

example. IRA Bank CD matures, at maturity, have funds go into IRA
Bank Savings account.

Then have Fidelity/Vanguard, request rollover, from Bank IRA
Savings and deposit in Fidelity IRA money market acct.

Then, you can distribute the IRA Fidelity money market funds
as you please...
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Old 02-18-2014, 05:48 PM   #8
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This is good to know. I just did the same thing today with the same players, from Fidelity to Vanguard. Fidelity is sending me a check payable to Vanguard FBO (for benefit of) which I then send to Vanguard.

I can see why Fidelity doesn't want to send it anyplace other than the address of record.

So I am double checking this as I will have to do this next January from a bank cd to rolling over into my vanguard Roth account. When I go to the bank for withdrawal, I request a check to be cut to Vanguard FBO and then mail it on? I want to eliminate this bank as I want to consolidate my finances and this would be a good opportunity for me to start.
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Old 02-18-2014, 09:40 PM   #9
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I have an IRA traditional rollover account at PenFed. In Dec 2013, they allowed me to opened new IRA rollover 3% certificate using the $250K from my existing IRA rollover certificate. They 1st transferred the funds to my taxable PFCU MM and then open the new IRA certificate. A week later, I took a distribution of 15K from the original $250K. They still issued a 1099R for $265K ($250K + $15K). Since the $250K never left PFCU and was moved back to my existing PFCU IRA account, should PFCU have issued a 1099R which included the $250K? Will the IRS consider this a move even though it never left PFCU or should PFCU give me a corrected 1099R for $15K only? I planned to open IRA account at another bank and fund it with the $15K within the 60 day period.
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Old 02-19-2014, 12:06 AM   #10
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I have an IRA traditional rollover account at PenFed. In Dec 2013, they allowed me to opened new IRA rollover 3% certificate using the $250K from my existing IRA rollover certificate. They 1st transferred the funds to my taxable PFCU MM and then open the new IRA certificate. A week later, I took a distribution of 15K from the original $250K. They still issued a 1099R for $265K ($250K + $15K). Since the $250K never left PFCU and was moved back to my existing PFCU IRA account, should PFCU have issued a 1099R which included the $250K? Will the IRS consider this a move even though it never left PFCU or should PFCU give me a corrected 1099R for $15K only? I planned to open IRA account at another bank and fund it with the $15K within the 60 day period.
Basically the same thing happened to a friend of mine. I believe it went from
IRA CD to IRA share to taxable share to IRA share to new CD. They issued a 1099R presumably because it left the IRA. Why they do that is a mystery to me. Perhaps if enough people complained, they might reconsider. It is a way though to slow down that stepup in yield for IRA CDs. If it stands, IRS could say you violated the 1 rollover/12mo rule and rule that 2nd rollover a taxable distribution even if you went back into an IRA.
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Old 02-19-2014, 12:45 AM   #11
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Basically the same thing happened to a friend of mine. I believe it went from
IRA CD to IRA share to taxable share to IRA share to new CD. They issued a 1099R presumably because it left the IRA. Why they do that is a mystery to me. Perhaps if enough people complained, they might reconsider. It is a way though to slow down that stepup in yield for IRA CDs. If it stands, IRS could say you violated the 1 rollover/12mo rule and rule that 2nd rollover a taxable distribution even if you went back into an IRA.
That is exactly the way it happened. I left out 1 more piece of information. My intention was to convert the $15K at the other bank from a Rollover to a Roth so I had planned to pay the tax on it anyway.
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Old 02-19-2014, 07:01 AM   #12
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So I am double checking this as I will have to do this next January from a bank cd to rolling over into my vanguard Roth account. When I go to the bank for withdrawal, I request a check to be cut to Vanguard FBO and then mail it on?
Here's the Vanguard link to start the process:

https://investor.vanguard.com/what-w...-rollover-401k

This gives the address and how to have the check made out. I'd guess you'd want to call Vanguard first so they are expecting it.
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Old 02-19-2014, 08:25 AM   #13
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That is exactly the way it happened. I left out 1 more piece of information. My intention was to convert the $15K at the other bank from a Rollover to a Roth so I had planned to pay the tax on it anyway.
I believe that's a key piece of info since I don't think Roth conversions get
counted as a rollover and so perhaps you haven't violated the 1 rollover/12 mos rule...........maybe IRS doesn't care since they're getting their pound of flesh already............but you need to be careful if you do a similar thing at PenFed.
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Old 02-19-2014, 09:07 AM   #14
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I believe that's a key piece of info since I don't think Roth conversions get
counted as a rollover and so perhaps you haven't violated the 1 rollover/12 mos rule...........maybe IRS doesn't care since they're getting their pound of flesh already............but you need to be careful if you do a similar thing at PenFed.
I just got off the phone with PFCU and a CS supervisor assured me that since the $250K never left PFCU, the IRS would not consider the transfer of the money from my IRA account, to my taxable account, back to my IRA account, to be a rollover. If that is correct, opening an IRA account at the other bank with the distribution of the $15K would be the 1st rollover as far as the IRS is concerned.
Does that sound correct?
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Old 02-19-2014, 10:51 AM   #15
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I just got off the phone with PFCU and a CS supervisor assured me that since the $250K never left PFCU, the IRS would not consider the transfer of the money from my IRA account, to my taxable account, back to my IRA account, to be a rollover. If that is correct, opening an IRA account at the other bank with the distribution of the $15K would be the 1st rollover as far as the IRS is concerned.
Does that sound correct?
I am not sure I believe what PF says anymore....not 100% anyway. Seems to me that the 2 1099Rs speak more loudly to the IRS than anything else. Did you ask them why the funds left the IRA to go into taxable.....that's the problematic step that caused the 1st 1099R.
edit to add: actually you probably just got 1 1099R for the total amount so IRS doesn't know when/how many withdrawals you took unless they stick their nose in further.
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Old 02-19-2014, 12:53 PM   #16
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I just got off the phone with PFCU and a CS supervisor assured me that since the $250K never left PFCU, the IRS would not consider the transfer of the money from my IRA account, to my taxable account, back to my IRA account, to be a rollover. If that is correct, opening an IRA account at the other bank with the distribution of the $15K would be the 1st rollover as far as the IRS is concerned.
Does that sound correct?
Hi MJ.

Did similar transaction with Penfed in Dec. But did not move money out to
another bank like you did. Did receive IRA 1099R. for 2013.

When I called Penfed, and asked why did you take the IRA CD funds and put them in NON-IRA Penfed Savings (this triggered the 1099R), then back into IRA Penfed savings, then into new IRA Penfed CD.

Penfed CSR said, because I had to leave 1K, in existing CD, this is considered a partial withdrawal, so IRA CD funds had to go into a NON
IRA savings account first. (not sure if I agree with this).

Be sure and add "rollover IRA" when you do your 2013 income tax.

Not sure if you broke the one IRA rollover rule.

I also asked the Penfed Supervisor, if he had received many calls similar
to mine, he said no.
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Old 02-19-2014, 06:07 PM   #17
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I am not sure I believe what PF says anymore....not 100% anyway. Seems to me that the 2 1099Rs speak more loudly to the IRS than anything else. Did you ask them why the funds left the IRA to go into taxable.....that's the problematic step that caused the 1st 1099R.
edit to add: actually you probably just got 1 1099R for the total amount so IRS doesn't know when/how many withdrawals you took unless they stick their nose in further.
Yes, I received 1 1099R which included both distributions. I know what you mean about the reliability PF.
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Old 02-19-2014, 06:10 PM   #18
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Hi MJ.
I also asked the Penfed Supervisor, if he had received many calls similar
to mine, he said no.
Funny, the Supervisor I spoke to said they get many calls like this. At PF, if you ask the same question to 3 people, you may get 3 different answers.
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Old 02-19-2014, 07:32 PM   #19
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I just got off the phone with PFCU and a CS supervisor assured me that since the $250K never left PFCU, the IRS would not consider the transfer of the money from my IRA account, to my taxable account, back to my IRA account, to be a rollover.
I just got off with the IRS and they said, since a 1099R was issued regardless that it was an internal distribution into another IRA, it is still considered a rollover. I hope the other bank will be able convert my $15K from my taxable account into a Roth without having to open a Trad IRA 1st. The IRS also told me since the Roth will (must) be opened within the 60 day grace, it will be a 2013 taxable event which is what I wanted since I was still in a low tax rate.
Of course, there is a chance that the IRS person was incorrect. I remember reading that information from these IRS reps was not legally biding if it was incorrect even if you recorded the conversation.
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Old 02-19-2014, 11:14 PM   #20
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Funny, the Supervisor I spoke to said they get many calls like this. At PF, if you ask the same question to 3 people, you may get 3 different answers.
here are some from today after reading your post:
1) supervisor: we allow withdrawals from existing IRA CD into new IRA CD
for old folks (keeping 1K min in old IRA CD) and do not charge an
EWP or report as a distribution (1099R).
2) CSR #1: we allow RMDs and "normal" (meaning "small" ) distributions from IRA CDs for old folks (keeping 1K min in old IRA CD) but do not allow them
to withdraw "large" amounts for the purpose of putting in another IRA CD.
3) CSR#2: I cannot discuss what happened to other folks because it is personal and confidential.
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