Broker failed to withold taxes as specified ..

[turtle052735]

What is the name of your state (only U.S. law)? FL
We sold off IRA's because they were small and we were going to be charged a fairly high fee to maintain them by our broker. When we signed the forms, we specified that we wanted withholding to be taken out of the proceeds. This was not done and our broker states that the main reason was because the IRA's were in mutual funds and not in cash. I want to know what our recourse is as we now might be charged for underestimating and - who knows what else.
Thanks.

 

[davew128]

There a reason you can't make an estimated payment?

 

[anteater]

This was not done and our broker states that the main reason was because the IRA's were in mutual funds and not in cash.

Did you take the distributions in kind - that is, the mutual fund shares themselves, rather than having the fund shares sold and then receiving cash?

 

[turtle052735]

I believe the mutual funds in the IRA were sold and put into our cash accounts - we were totally unaware of this until I looked at some forms and saw no withholding was taken out...

 

[davew128]

and is there a reason you can't now make an estimated payment?

 

[anteater]

and is there a reason you can't now make an estimated payment?

I get the feeling that this was a 2010 transaction.

OP:

If they were so small that the annual fee was unjustified, there might not be an underwithholding penalty. While I tend toward the view that it is your responsibility to ensure that the withholding took place or, as davew128 says, make an estimated payment, you can always go up the chain at the brokerage requesting reimbursement if you do end up with a penalty.

 

[davew128]

I get the feeling that this was a 2010 transaction.

While I wouldn't discount that possibility, one would think if one requested a liquidation of an IRA with $XXX value and indicated withholding and then got a check for exactly $XXX that something ought to trigger inside and say hey there's something wrong. To wait until a 1099-R is issued anywhere from 6 weeks to a year later to notice and say something....

 

[turtle052735]

It was 2010 and the sale was in November. I honestly did not notice the transaction when looking at my brokerage statement. I never received a check in the mail or I would have noticed that the taxes were not withheld. The monies derived were put into the cash account in the brokerage account. The amount that should have been withheld would be approximately $1300.

 

[turtle052735]

AND - upon checking, the portfolio was NOT sold but transferred to another account...

 

[Kiawah]

Transferred from an IRA account, to an IRA account?

or an IRA account, to a non-IRA account?

 

[FlyingRon]

So, what do you want? Pay the taxes. Most likely at this point you don't owe any interest or penalty. If you do, you *MIGHT* (and that's a stretch) be able to make a claim against the broker however. The taxes are yours to pay.

 

[davew128]

So you made an in kind distribution of the portfolio from the IRA to a non-IRA account? And without selling assets you expected them to have withholding.....how?

 

[turtle052735]

I was mailed a form to sign when we decided to transfer the IRA accounts out and on the form it asked if we wished to have any monies withheld for the IRS. We checked the 10% and assumed it would be done as requested.

 

[tranquility]

Your recourse is to sue for damages. Since you have none, you have no recourse.

 

[davew128]

I was mailed a form to sign when we decided to transfer the IRA accounts out and on the form it asked if we wished to have any monies withheld for the IRS. We checked the 10% and assumed it would be done as requested.

And it would have been done...had you instructed them to sell some securities.