Self-directed IRA

[neilbrink]

New client brings in her forms that include a "self-directed IRA" form 1099-R. The PAYOR box shows the Payer's name as *Client*, Self Directed IRA, (Local Bank) Custodian, and the local bank's address. However, the PAYER's Federal identification number is the client's social security number. The recipient is stated as the client with the client's id number being her social security number. Both the Payer's ID number and Recipient's ID number are the same, which is the client's social security number. The 1099-R form looks like it was hand typed (couple of mistakes). My ATX program did not want to take a social number as the Payer's Federal ID number. I am wondering whether this will even go through the efiling system.

[jainen]

>>self-directed IRA<<

Sounds like she is only using the bank as a depository, not custodian. Call the bank to verify whether it is actually an IRA. Then print page 8 of Pub 590 and call your client. Wait until 5:00 because you'll probably need a break after explaining the implications of reading those stupid investment journals.

By the way, did you ask her why she isn't going back to her previous accountant?

[joanmcq]

Ouch. Then get yourself a drink after you have to explain the large tax bill she'll have.

[neilbrink]

I did call the bank and talked to the young lady who prepared the form. She is in the trust department, has been there for 4 years, was instructed to complete the forms in that way, and has been doing so for the last 4 years. It is an IRA account. It has been set up as a self-directed IRA account, and the bank only prepares the forms for her. Her explanation was that since the Bank Trust department is the custodian, and since the Trust department does not have a Federal ID number (only the Bank has the federal ID number), then they had to use her own social number for the Payor.

[jainen]

>>since the Bank Trust department is the custodian, and since the Trust department does not have a Federal ID number (only the Bank has the federal ID number), then they had to use her own social number for the Payor.<<

I would document that conversation and otherwise accept it at face value. But it really sounds like nonsense to me.

[joanmcq]

I've never heard of a self directed IRA being done through a bank. Usually there are specialized custodians for these things. What does she hold in the IRA? Just cash? Is she over 59.5?

[neilbrink]

The self-directed IRA account holds stock as well as cash. Client is over 70.5 and takes a distribution each year.

[neilbrink]

I now have received the "reject" notice from the IRS, not accepting the Social Security number as "payor". "The payor Identification must match the payor name".

[joanmcq]

The IRA should have an EIN.