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February 16, 2009

Revocation

Your Guide

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Definition

The act of revoking a contribution, rollover contribution , Roth conversion, or transfer to an IRA.

An individual who establishes an IRA must be permitted to  revoke the account, or endowment contract by mailing or delivering a notice of revocation on or before seven days after the earlier of the date the account is established  or purchased. An individual who revokes an IRA must receive the entire amount of deposited to the  account, annuity, or endowment contract . The balance cannot be reduced by  sales commissions, administrative expenses or fluctuation in market value.

Form 5498 must be filed to report any regular, rollover, Roth  conversion, SEP IRA, or SIMPLE IRA contribution to an IRA, even if the transaction  is subsequently revoked

Form 1099-R must also be issued to report the revocation. However, the indication of whether the amount is taxable is determined by the type of transaction being revoked.

Referring Cite

Treas. Reg. 1.408-6(d)(4)(ii)(A)(2), Instructions for Forms 1099-R and 5498

Additional Helpful Information

  • The revocation procedure must be explained in the IRA agreement, and may require that the notice be in writing , provided verbally, or it may require both a written and verbal  notice.
  • If a verbal notice is required or permitted, the procedure must permit it to be delivered by telephone call during normal business hours.
  • If a written notice is required or permitted, the procedure must provide that, if it is mailed, it will be considered mailed on the date of the postmark (or if sent by certified or registered mail, the date of certification or registration) if it is deposited in the mail in the United States in an envelope, or other appropriate wrapper, first class postage prepaid and  properly addressed

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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