Weird unknown deposit into a Roth account

[Animorph]

I had $189 deposited into one of my Roth accounts. In the activity report it just said "cash", no clue about where it was from. I messaged Fidelity and they said it was a credit card reward. But my Fidelity CC's both deposit into my checking account, not the Roth, and don't show anything close to $189 in rewards, and were working properly as of Dec 2. Hopefully Fidelity is still working on it.

But that puts me in somewhat of a bind. I have no earned income and I have no tIRA in my name. I'll probably have to fill out an "excess contribution" form and get Fidelity to officially remove the deposit, including any gains over the last few days, and get it done before the end of the year.

Fidelity suggested a recharacterization into a tIRA contribution, but I have no earned income. Or leave it in and pay penalties until I can make a contribution (not going to happen).

I was thinking maybe I could withdraw $189 from a tIRA and call it a Roth conversion. Although the deposit would occur before the withdrawal. Not sure anyone would care, but I have Roth converted all of my tIRA and have been working on DW's the past couple of years. Think that would have worked?

And the most extreme solution I came up with is to earn $189 somehow that would make the contribution valid. No way.

I'm still hoping Fidelity fixes their mistake. I'd hate to take it out of the Roth only to have Fidelity take it back from my taxable account. $189 Roth withdrawal for nothing. Not that it would be anything but an annoyance. But I hate to fill out forms.

Any other ideas for an easy fix?

 

[Montecfo]

If what you say is true I would pressure them to fix the problem they created.

If they can't then they should not report it as an excess contribution since you made no such contribution.

 

[jazz4cash]

Why couldn’t you “earn” $189 in misc income?

 

[Ready]

I would imagine there is a process to dispute a transaction with Fidelity. I know it's uncommon to dispute a deposit, but I don't see any reason why it could not be done. You can then request they redirect it to a non retirement account as a resolution to the dispute.

 

[pb4uski]

Withdraw it from the Roth as a mistaken contribution.

But that doesn't prevent it from happening again. Fidelity's explanation is stupid... press them for a sensible answer and if you don't get one escalate the issue or file a complaint.

 

[SecondCor521]

When Schwab made a similar flavor of mistake with my son's Roth IRA, we spoke with them several times and insisted they fix it. Not only were they able to fix it properly, they were able to do so with some sort of administrative special fix-it magic such that the original erroneous transaction was completely erased and the new correct transaction took its place.

I think that if you press Fidelity, they will be able to fix it, and fix it in such a way that you won't actually get any tax forms related to the incorrect transaction and thus there will be no impacts to you tax-wise. It will be as though it never happened at all.

 

[Sunset]

When I had $50,000 deposited into my employers 401K , I mentioned it to an SEC fellow, who said their office would be interested in that. As it's a way for a person to hide/launder money
I didn't follow up.

The company took it back out after about 4 months.

Could it a cash deposit from a company doing a spin off and selling the partial shares ?

 

[njhowie]

Simply print out a copy of the message from Fidelity and keep it with your tax forms for this year.

You did not make the deposit, and Fidelity has clarified what it is for. Should the IRS come sniffing, you have the necessary documentation.

In reality, the IRS is not going to care about $189.

Here's an easy way to verify how the deposit was characterized. Log in to your Fidelity account and go to the summary screen for the Roth. What does it show for the contribution amount made for 2020 and the limit of what you have remaining to contribute? Does it show $189 of contributions made in 2020 or that there have been no contributions in 2020?

 

[Animorph]

Here's an easy way to verify how the deposit was characterized. Log in to your Fidelity account and go to the summary screen for the Roth. What does it show for the contribution amount made for 2020 and the limit of what you have remaining to contribute? Does it show $189 of contributions made in 2020 or that there have been no contributions in 2020?

Yep, they show $189 in contributions for this year.

The holdings in this account are:
FSMAX
FSGGX
FXNAX
All large index funds that shouldn't have any weird payouts. I have plenty of the exact same funds in other accounts with no cash payouts. (A legacy of my Roth convert and recharacterize strategy back when that was possible.)

I used the secure messaging for my first try. I'll try a phone call next. Oh joy!

 

[Animorph]

"2. You may request a Return of Excess contribution. The contribution plus or minus any applicable gain or loss is removed. Any earnings associated with the excess contribution would be subject to tax and the 10% early withdrawal penalty.

To remove an excess contribution you will need to complete the Fidelity Return of Excess Contribution form. You can complete this form online by accessing the link below:

https://scs.fidelity.com/accounts/onlineforms/onlineforms.shtml?formName=IRA_RETURN_EXCESS&blank=N
"

That didn't sound too appetizing. Though a phone call doesn't either, even though they've been pretty good the few times I've had to call.

 

[Animorph]

Looking at the REC form Fidelity warns:

"If you have a Fidelity Brokerage IRA, sufficient funds in your core position to cover the excess amount as well as any earnings or losses"

I have no cash in the Roth except the unfortunate deposit. I may have to sell a tiny bit of something in order to cover possible "earnings" before I remove the deposit.

Looks like I have at least until the tax filing deadline to make the withdrawal, so that gives me a little more time to convince Fidelity to magically remove it. Though the tax forms from Fidelity might be off if I wait that long.

 

[agh1]

FXNAX paid out a capital gain on 12/7. Could that be what this cash is?

 

[SecondCor521]

FXNAX paid out a capital gain on 12/7. Could that be what this cash is?

If so, it shouldn't show as a contribution as post #9 describes.

 

[cathy63]

If it shows up as a contribution in Fidelity's records, then it can't be a capital gain payout from one of your investments. They have clearly made a mistake here, but there's no way their systems could have erroneously classified investment returns as contributions without raising red flags across numerous accounts.

I assume the person who told you it's a credit card reward thinks it's something like this Fidelity Rewards Visa Signature Card: https://www.fidelity.com/cash-management/visa-signature-card. I'm really surprised that they even allow rewards from that card to fund retirement accounts! That seems like it would cause all kinds of problems like this one. Do you have a Fidelity card that pays rewards?

My main concern with doing the withdrawal on your own would be that sometime next year Fidelity figures out that they screwed up and when they go to recover the funds from your account they have to sell something in order to raise the cash. At least it's a Roth, so your withdrawal wouldn't retroactively become a taxable event.

 

[njhowie]

Looking at the REC form Fidelity warns:

"If you have a Fidelity Brokerage IRA, sufficient funds in your core position to cover the excess amount as well as any earnings or losses"

I have no cash in the Roth except the unfortunate deposit. I may have to sell a tiny bit of something in order to cover possible "earnings" before I remove the deposit.

Looks like I have at least until the tax filing deadline to make the withdrawal, so that gives me a little more time to convince Fidelity to magically remove it. Though the tax forms from Fidelity might be off if I wait that long.

I think you are getting yourself worked up and you shouldn't.

You did not make any contributions, Fidelity made a mistake somewhere along the way.

As someone else has mentioned - just push to get them to fix it.They will do it and make all the transaction records correct and disappear if necessary. I've had similar happen on other issues. If you get no satisfaction from the first line representative, escalate until you reach someone who will take ownership of the issue and get it resolved. Don't worry about your core position etc. and don't rush to fix it on your own by doing the REC.

Bottom line, Fidelity made a mistake. It's up to Fidelity to fix it. Go from there.

 

[pb4uski]

Looking at the REC form Fidelity warns:

"If you have a Fidelity Brokerage IRA, sufficient funds in your core position to cover the excess amount as well as any earnings or losses"

I have no cash in the Roth except the unfortunate deposit. I may have to sell a tiny bit of something in order to cover possible "earnings" before I remove the deposit.

Looks like I have at least until the tax filing deadline to make the withdrawal, so that gives me a little more time to convince Fidelity to magically remove it. Though the tax forms from Fidelity might be off if I wait that long.

Isn't the $189 in your settlement account? If so, there are no earnings to fret about, of even if there are a few cents, they'll be in your settlement account.

I think you can fill out the form, print it, sign it, scan it and then send it to them via secure messaging... less than 1/2 hour soup to nuts.

 

[Animorph]

I assume the person who told you it's a credit card reward thinks it's something like this Fidelity Rewards Visa Signature Card: https://www.fidelity.com/cash-management/visa-signature-card. I'm really surprised that they even allow rewards from that card to fund retirement accounts! That seems like it would cause all kinds of problems like this one. Do you have a Fidelity card that pays rewards?

I have two Fidelity Visas, one older one at the 1.5% rate and one at the 2% rate. I looked at their settings, both deposit into my checking account and have never been connected to any retirement account. One deposits automatically, one manually. The automatic one made a deposit of $37.58 (comparable to previous rewards) to checking on 12/2. Which is suspiciously the same date as the $189 deposit into the Roth. Not sure if everyone gets rewards on the same day, but that does support the claim that it came from a CC reward. Just not mine. I haven't done a manual reward deposit in a long time, but the card's online history doesn't show a reward being issued.

The $189 is in my settlement account. The problem is if I do a normal removal of excess contribution Fidelity needs to remove the "contribution" X ((current value of the account) - (value of the account on contribution date))/(value of the account on contribution date). The gain is calculated for the entire account, not just the interest earned on on the cash. Probably a few percent, and only applied to the $189, but I'd need to sell something like $5 of one of the funds in order to raise the cash above $189 to allow for the "gains" to be removed. And pay taxes on that extra amount!

So yeah, I'll just have to keep working on them to fix it.

Enough to do around the holidays without hanging out on the phone with Fidelity for something I would normally let them worry about (after telling them it's their problem). But the contribution aspect and the short number of days left in the year will force me to actually pick up the phone.

Thanks for the help. I'll do almost anything so I don't have to call and be assertive on the phone. I'll have to actually pause Netflix for a little while!

 

[cathy63]

... but that does support the claim that it came from a CC reward. Just not mine...

Yeah, that's the thing that concerns me. It's not your money. Eventually Fidelity is going to figure out that they directed this money to the wrong person's account and they will remove it. When that happens, it's better if you haven't removed it yourself.

If Fidelity does continue to insist it's your money, then you can do the withdrawal up to 6 months after a timely filed return, so October 15, 2021 assuming due dates are not postponed again as they were this year. You would just have to file an amended return when you do it.

You could also take a chance and just ignore the problem for now. If Fidelity hasn't corrected this by next May, they will send a 5498 to the IRS showing the contribution. If the IRS is able to connect the dots and see that your corresponsing tax return doesn't have any earned income, then they will send you a letter telling you that you have an excess contribution and assessing a penalty. You'd still have until October to remove the money with no penalty; or worst case if it's later than that, you just pay the $11.34 tax and keep the money. I suspect they would not actually be able to connect those dots though, and I think it's unlikely they would catch this.

 

[Animorph]

Yeah, that's the thing that concerns me. It's not your money. Eventually Fidelity is going to figure out that they directed this money to the wrong person's account and they will remove it. When that happens, it's better if you haven't removed it yourself.

If Fidelity does continue to insist it's your money, then you can do the withdrawal up to 6 months after a timely filed return, so October 15, 2021 assuming due dates are not postponed again as they were this year. You would just have to file an amended return when you do it.

You could also take a chance and just ignore the problem for now. If Fidelity hasn't corrected this by next May, they will send a 5498 to the IRS showing the contribution. If the IRS is able to connect the dots and see that your corresponsing tax return doesn't have any earned income, then they will send you a letter telling you that you have an excess contribution and assessing a penalty. You'd still have until October to remove the money with no penalty; or worst case if it's later than that, you just pay the $11.34 tax and keep the money. I suspect they would not actually be able to connect those dots though, and I think it's unlikely they would catch this.

I may be counting on those extra days to get it removed.

I called Fidelity this morning, spending an hour on the call with them and then Elan, the card company.

I called the Fidelity general contact number. The automated system did not understand "a bad deposit to my account" or any variation I could think of. Even "Representative" wanted me to describe the problem and wouldn't accept anything it didn't understand. Finally it misunderstood that I wanted to report a new death (not sure how it decided on that!). That got me to a person at last, though they were a bit confused about how I got there with a deposit problem.

Fidelity can see that the deposit was from Elan. That was as far as they could go. They offered to connect me with Elan, but didn't stay on the line when they did.

Elan , of course, did not see any reward payment of $189 from either of my Fido cards. They were pretty much baffled. I was complaining about a reward deposit at Fido from Elan that they had no record of in my CC accounts. But they said they would investigate with just the dollar amount, deposit date, and my Roth account number as clues. Elan offered to transfer me back to Fidelity, put me on hold for five minutes, and then came back and said Fido was taking too long to hang around any longer.

An hour on the phone was long enough. I'll let it stew until Monday. It seems like Fidelity could maybe move the deposit to a different account. But if it was a valid transaction due to Elan's error there's not much else Fidelity can do.

I think Elan will have to fix an error and then correct it with Fidelity. Their success might be doubtful given only what I gave them to work with, so hopefully another customer realizes they didn't get their CC cash reward and complains.

I knew I didn't want to do this!

 

[cathy63]

Ah, I should have realized there would be a 3rd party involved in all this. To my mind, that makes it even stupider for Fidelity to allow these types of deposits to go into retirement accounts.

 

[KenZ71]

Fidelity has been annoying and profitable for me over the years.

They duped a payroll deposit into my account 20 ish years ago. They insisted it was valid so I left the funds in the account as a buffer for about a year.

About 16 years ago they gave me a 0% forever credit card offer with a huge limit. Read the fine print a few times then maxed the card out and setup minimum payments. Been paying about 160 / month past 14 years & not a nickel of interest.

In my employer sponsored stock plan I've had a "pending settlement" of $37 for at least 18 months. Cash balance has been a few hundred to few dollars, that pending item won't go away.

So I have no faith in a darn thing from Fidelity.

 

[pb4uski]

Perhaps what you could do is to send the CEO of Fidelity a letter by certified mail.... explaining the $189 credit to your account was not from you and that you have tried on two separate occasions to alert Fidelity of the error so they could correct it... provide as much details as you can and copies of relevant documents.

Then conclude the letter with something along the lines of that while you are hopeful that Fidelity will correct the error that your main reason for writing it and sending it to them is so that if the IRS accuses you of making a contribution that you were not entitled to make because you have no earned income that you wanted a written record to show them that you made a good faith effort to notify Fidelity of the error and asked them to correct it.

I'm guessing that something will happen in response.

 

[Animorph]

This issue was resolved by the card company, Elan (via Cardmember Service).

"Our records show this deposit occurred due to a customer entering their Fidelity investment account number incorrectly. We appreciate you brining this tp our attention, and are working to remove the deposit."

Wow, I thought they would at least match names for the accounts. Maybe that's only for withdrawal-enabled EFT's? Who needs passwords when misconnections are this easy?

The money is still in my account, so nothing has actually happened to fix the problem, but hopefully soon.