IRA levied

[Wendy]

I have a client who was incorrectly billed from MA for sales/use tax in 2007 and tried to handle the matter himself. End result was that the state levied his account for what it thought was due - but levied his IRA account. Due to this, he received a 1099R for distribution in 2007 which, of course had to reported on his 1040.

Early 2008 the state admitted their error and refunded the money in 2008. Refunded directly to the client who then took it to the bank to replenish the IRA. He was also assessed levy fees etc which were not refunded.

What is the easiest way to handle this? I am waiting to hear from the bank to see how they treated it. Could we call it a 2008 contribution so he gets benefit of it in 2008 since it was not deposited directly to the IRA by MA? This also decreases his potential 2008 contribution.

Any thoughts? Thanks.

Wendy

[michaelmars]

off the top of my head, id amend 2007 to show the dist was erroneous and repaid by the state.

[Lion EA]

Was it enough money to ask for a waiver of the 60-day rollover rule? Showing it was an involuntary withdrawal and replaced as soon as some of the MA issues were cleared up. Don't know if that requires a PLR or not. I'd also get the remainder of the money replaced by private funds if trying to get a waiver on rollover time limits so you don't have to go through it again when/if MA refunds their fees. I also like the idea of amending 2007 to show the way it was supposed to be and was eventually when MA returned money.

[Wendy]

It was just over 3800 and withdrawn in April 2007 - not corrected until 2008. The bank has it listed as a rollover contribution.