I am nearly overwhelmed by how complicated it is to perform rollovers and transfers. I wonder exactly why you were audited? It’s been quite awhile since I’ve jad to handle a check but the only problem I had was convincing my credit union to accept the check. More often than not there some issue but Fidelity has only been the problem once. My worst experience was a 1099 issued by mistake from a local bank. That held up our tax return for a year but at least I didn’t get audited!
So it wasn't an audit in terms of going through the return and checking numbers. The IRS has a special section (forget the name, it was 10 years ago) that apparently focuses on IRAs. I got a vague letter stating there was a problem with my IRA without telling me what the actual problem was and requesting (demanding) additional info... again, without saying what info was needed.
Over the span of about 4 months of repeated cycles of:
- taking my documentation down to the local IRS office to talk to them in person.
- the local office saying "this looks clear, I'm sure this will resolve the problem" AND the locals sending the additional documentation to this special IRS group.
- receiving yet another letter from the IRS stating the documentation is unsatisfactory (without saying why) and escalating warnings (threats) that penalties and interest would apply and finally threatening to freeze ALL of my bank accounts.
I finally called a CPA that I worked with on audits of a local charity. He pointed me to the Taxpayer Advocates office. The Taxpayer Advocate was able to give me the direct phone number to the "IRA group" within the IRS. I called them and asked what, exactly, is their concern. The conversation went like this.
IRS: All they wanted to know was that the IRA was rolled over within 60 days.
ME: I replied the IRA was rolled over that same afternoon as I literally walked the check across the parking lot from the old bank (Wells Fargo) to the new bank (Wachovia).
IRS: "Oh... OK. That's what we needed".
ME: "Do you need any proof? I can send more documentation with dates".
IRS: "Nah... we're good".
End of 15 minute call. End of story.
The IRS was about to impound my entire life savings but didn't need any proof over what I was verbally telling them on the phone.
To this day my wife has a panic attack when mail arrives from the IRS... so I warn her in advance when I order tax forms and pubs to be sent by the mail.
I just moved my wifes IRA last week from a local credit union to Fidelity. I open the new IRA account at Fidelity, point Fidelity at the credit union and upload a copy of the last statement using Fidelity's document vault. The $ are now in Fidelity without me touching a check or even speaking to the credit union.
Let's go to the replay:
