Over a year ago my nephew, a college student, consolidated his small accounts by tranferring them to Vanguard; most were Roths. However, one taxable account did not generate a 1099 and he caught this over the weekend when comparing his 2012 return with the 2011 return. He called Vanguard and was told that the account came in as a Roth. It left D&C as a regular account and he has the paperwork to show it. Anybody had this problem, and how do you fix it?
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While it probably will require some work by your nephew, off the cuff, I'd say producing hard copies of those documents should help sort out who had the fat-fingers during the transaction.
1. Photocopy last statement from old provider (D&C) - preferrably the one that shows the transfer out to Vanguard.
2. Photocopy statement from Vanguard showing transfer in (as Roth).
3. Send photocopies to Vanguard via Certified USPS Mail, with cc: to D&C. With brief explanatory cover letter. Say that you will be contacting them.
4. After Vanguard has received letter (check via USPS website), call them two days later.
5. Ask to speak with a/your representative. Ask them how will Vanguard fix the problem.
6. Write down who you spoke to and what they said. Send them a confirming e-mail.
Think that should do it. - Good luck.
Why punish yourself for being more intelligent then the dummies working at Vanguard and why waste your time when the mistake is in your favor?:
Heads- You save time when the IRS figures it out in collaboration with Vanguard. No one's going to hold you accountable for something that wasn't your mistake (and if they do THEN you can hold accountable whoever's really responsible...I'm sure Vanguard would rather reimburse you any minor IRS penalties than be taken to court where you'd have documents from the federal government proving what their error has cost you).
Tails- They never figure it out and you effectively received a free IRA overcontribution.
I would just add: be firm, polite, patient and unintimidated. And maybe keep ibartman's steps handy as a reminder of what the plan is.
I got into a strange situation with Vanguard customer service a couple of years back in which I was courteously being told to do things with a trust which I knew I could not do. I knew the representative, however insistent she might be, had to be mistaken. It took me a surprisingly long time to get the issue escalated to the level where the mistake could be recognized. Still, patient persistence will usually do the trick eventually. If not, your nephew can always suggest that he has heard that the nice folks at Fidelity or T. Rowe Price take a long-term term view of young investors and may be able to help him better with all his accounts.
gfb
On the face of it, it looks like the port came out of D&C correctly, and we will verify that with them. The draft of a letter to V is the very model of firmess, politeness, etc., and once we dump it on V they should have every incentive to locate Mr/Ms Fatfinger.
If you all can stand it, I'll keep you posted. If it doesn't go well, I'll be heading for the bar...
best, hawk