Hi,
My wife wanted to rollover her IRA CD to Vanguard. She told the bank that she wanted to roll over the entire CD and close the account. They sent her a check and she transferred it to a Vanguard IRA within 60 days. Now the bank is reporting it as a total distribution, code 1. They should have withheld 20% or offered to do a direct rollover. Is there any way to avoid the 10% tax?
My wife's memory is that the bank representative she talked to didn't realize it was an IRA CD. My wife didn't know about the 20% withholding on an indirect transfer and neither did I. I have some memory of doing an indirect transfer a long time ago without having to deal with the withholding and having to make up the difference.
If she pays the 10% and now has the money in a Vanguard IRA, is the amount taxed again when she withdraws it?
Finally, is the rollover in this case not treated as a rollover so that the Vanguard IRA is treated as a new IRA an subject to limits (so that she may also be penalized for excess contributions to an IRA?
Thanks for any assistance!