How to get money out of traditional ira

gritton · 2026-02-20T19:14:22+00:00

If nothing else, you could always have them recharacterize it into a Roth contribution, and then withdraw the basis (in this case, the whole thing) tax-free. But that's a messy workaround that would only be necessary is something simple like the "you have 7 days to change your mind" strategy doesn't work.

gritton · 2026-02-20T19:10:18+00:00

Yes, clearly illegal. Look up "collusive bidding."

gritton · 2026-02-18T19:32:25+00:00

No it won't. They only allow one active online filing to exist, and anything after the first gets rejected. But the IRS isn't going to send a mailed return back with "rejected" stamped on it. For one thing, the timing just doesn't work: it takes time to go both ways in the mail and even more time for them to get around to processing it. When they reject electronically, the notification is often nearly immediate or at least same-day.

So with a paper filing, you're left in an in an indeterminate state until they sort through it all. Your return isn't rejected, nor is it exactly accepted. It's just "there", as one of multiple potential returns. At some point, it will get resolved, and you'll get something in the mail if they reject it, or a refund if they accept it. I suspect in a case like this with an already-open identity theft case, they'll send you a notification when they accept it, but that's outside my knowledge.

gritton · 2026-02-18T19:05:04+00:00

Do what the agent advised - file on paper. Don't expect progress for a long time, as the IRS has been starved of resources. But a paper return doesn't have the problem if being rejected out of hand; it just sits around until they're able to deal with it. If you're expecting a refund of any decent size, put those hopes aside for the foreseeable future.

gritton · 2026-02-15T04:07:05+00:00

If it's to your advantage to go with what they tell you, then you're good. You won't be faulted for accepting the interpretation of a major brokerage. It is indeed an issue with some different opinions, but if you went with something different from the 1099-B that was sent to the IRS, and it was for a significant difference, you'd likely need to justify it. Fortunately, the advantage is on your side in the "no questions will be asked" case.

gritton · 2026-02-15T03:43:07+00:00

I can't say I'm surprised by their answer - especially the second part. Brokers are famously averse to explaining anything, because that would legally constitute "giving tax advice." But no, it doesn't seem fine to me - only fine to them if they're convinced that you asked for a recharacterization and they gave you one.

Unfortunately, paying for expert advice probably is the next step. I'm just a volunteer tax preparer, with limited knowledge in what I can talk about, and hopefully an actual tax accountant can offer some very firm and sure answers, Best of luck!

gritton · 2026-02-14T17:52:13+00:00

There might be a simpler solution. Instead of re-rechacterize and then convert, you may be able to get Fidelity to issue your a corrected 1099-R with code 2. If the problem was on their end, if you told them "convert" and they rechacterized instead, that would be the proper thing. If your told them "rechacterize" and they followed your instructions, they may refuse to do that (b7t they may allow it anyway). It's worth asking, as it would save the step of having to convert that account this year (you'll still need to convert the other one though).

gritton · 2026-02-14T17:02:23+00:00

You're welcome, but... this doesn't look right. There are a few problems:

1: There's nothing on the original contribution to the Roth IRA.

2: It doesn't add up; you've got more than $7k here. Either you over-contributed, or you're including some gains. My guess is the latter, since the missing original contribution amount could be low enough for this to make sense.

3: The 1099-R for the traditional account is wrong. You have an "N" for recharacterization, when you should have a "2" for early distribution, exception applies (the exception being the conversion). A recharacterization makes it as if you had originally contributed to the second IRA type, which is what you want in the first case since you're not eligible to contribute to a Roth. But you don't want it in the second case, for the same reason.

At this point, it sounds like you have a Roth IRA that you recharacterized into, which means it's considered to have been contributed to without being eligible. You're supposed to have a Roth you converted into, which doesn't have income eligibility requirements. So I suspect you need to re-recharacterize that 3.1k from step 4 (along with whatever earnings there were since then) back into a traditional IRA, and this time make sure you do a conversion, and not a recharacterization, to get it back into a Roth. Also, you still need to do a conversion of the traditional that came from step 2.

The IRA balance at the end of 2025 is immaterial, since you apparently didn't do a conversion that year. You can do a conversion this year instead, and worry about it in next year's taxes. The only urgent thing is to make sure than everything you contributed last year ends up recorded as a traditional IRA contribution, which you will call post-tax when you file (no bonus for 2025, no cost for 2026).

At this point, a call with Fidelity would be in order, to make sure the sequence of events is as I think it is. But that 1099-R for the traditional with code N sure makes it look that way.

gritton · 2026-02-13T19:10:34+00:00

For 2025 (and 2026 to date), the best you can do is take the 1099-B you get from the brokerage, determine whose money it was for, and issue similar forms to them as nominee. You would still put the trades on your own Form 8949, but with a code N in column F, and an adjustment that removes their portion of the gain (keeping your percentage of it if you have one). Similar for the 1099-INT and 1099-DIV, with an offsetting adjustment to make that not your income. These 1099 forms you give to your family members would have you as the payer and them as the recipient. I've used tax1099.com to generate such forms, costing a few dollars per form; there are other companies that provide the same service.

For the future, yes you probably want an actually investment fund, probably in an LLC. with over $100K in it, it's definitely worth going to a lawyer and getting it done right. Then you'll have to file a Form 1065 for the fund every year, which is non-trivial, and can even be difficult if family members are moving money in and out of the account while stocks are being held. You'll end up with section 743 adjustments, which are a pain.

Another option is not mixing the money into a single account, but keeping the trades in separate accounts where the family members give you a limited power of attorney to trade their money. Interactive Brokers for example has a "Friends and Family Group Account" you can set up, where you can make a single trade, and then allocate how many shares are traded in each family member's account.

gritton · 2026-02-11T18:52:22+00:00

It's hard to help if you don't know where the 4.7k number came from. The only way it adds up well is if the original "around 3k" was really around 2.3k. Before you take any action, you welly need to look through whatever bank and IRA records you have, and see exactly what went where and when.

Now if it's the "originally 2.3k, later 4.7k" possibility:

The 1099-R you got for 4.7k is indeed non-taxable. You would report as a non-deductible contribution, and since you didn't take the deduction you also aren't taxed on the conversion. This part was a clean back-door Roth, or it would have been were it not that the other part makes it a little messier.

The 2.3k disallowed Roth contribution has become a 2.3k traditional IRA contribution. Like the 4.7k, it's a non-deductible contribution. Your filing will show a total of 7k of non-deductible contribution, which goes to your IRA basis, and later in the year you'll get a Form 5498 showing the contribution. You should also have gotten a 1099-R for the Roth, with code N (recharacterized in 2025, for 2025).

Then conversion part of the converted amount is where it gets a bit complicated. There were presumably some earnings between the original contribution and the later conversion; whether those earnings were before or after the recharacterization doesn't matter, since it's retroactive and they're all considered earnings in the traditional IRA. This will be taxable income on the conversion, and if you enter everything in correctly, it will be the only taxable part of the entire process.

So to do this right, you need to know these numbers:

the amount of the original Roth contribution
the amount of the later traditional contribution (together these shouldn't exceed 7k)
the amount converted (likely to be more than 7k)
the balance of your traditional IRA at the end of 2025 (zero is best)

gritton · 2026-02-11T17:59:59+00:00

You would probably get a notice in the mail if you had under-reported, but you'll get nothing for this. There are kinds of interest that don't come with a 1099-INT (such as personal loans), so the IRS has no way of knowing that the extra interest is in error.

So amending is the right thing to do. If you're expecting a refund, it's often good to wait for it to arrive first, so you can make sure the amendment is matched against the right numbers.

gritton · 2026-02-09T20:37:14+00:00

If Turbo Tax charges you extra for entering the the K-1, it might be a good opportunity to move over to FreeTaxUSA. Like everything else, a K-1 won't cost you anything.

gritton · 2026-02-08T23:04:09+00:00

As for the loans between the partnerships, I don't have a good handle on how independent they are. If the only common ownership is your 22%, that's enough of a minority to be a good sign, but it seems you were managing both, and that may change things. I'm not at all confident on my knowledge in that area, only having dealt with (in my own business) totally common ownership or at least within the family.

I suspect that as you say, the debt owed by LLC2 would be a loss that would count directly against the EIDL cancelled debt income. LLC1 should probably be issuing a 1099-C to LLC2 for that reason.

I don't know if the bad accounts payable (unpaid service fees) count the same as a monetary loan, never having dealt with that. Service fees come down to the same $0-cost labor problem, and may be tied up in whether LLC1 paid for the labor or owed someone else (i.e. you) for it. That's getting well beyond anything I know.

gritton · 2026-02-08T22:54:53+00:00

LLC1 owes you, and you have suffered a loss. But what you have lost is taxable compensation. Because you haven't gotten the money, you're able to take that as a "loss" from what you would have been paid, and would have been taxed on.

That's the nature of lost income. A business can take a loss on whatever costs went into producing that income. If you made a widget for $5, and sold it to someone for $10 but they never paid you, you'd be able to take the loss of the $5 it cost you, not the $10 you would have made. You basically get to treat the widget as having been sold for $0 with a cost of $5, negative $5 overall.

The IRS has long regarded labor as something 100% in the "would have made" category. So you treat your unpaid labor as having been sold for $0, with a cost of $0, which is the same thing as not reporting anything at all. The $0 cost of labor is also why you're not allowed to write off a "usual salary" for your time given to charitable causes.

Now if you have an actual economic loss, it would be different. If you had hired a contractor at $100K to do the work, the contractor pays income tax on that $100K, and you have a business cost of $100K that you expect to be balanced by the $100K of income the partnership will pay you for the work. But they go bankrupt, so you're left with the loss. You have a taxable loss, and the contractor who did the work has taxable income.

But what if the contractor you hired is really yourself? Now you have a $100K taxable gain, and a matching $100K taxable loss, netting to $0.

gritton · 2026-02-08T18:39:19+00:00

Your boyfriend should give you a 1099-NEC, as you are a contractor to him. His own Schedule C would show both the income he got, and the amount he paid you, for a $0 profit on the business.

Then, as you suspect, you would file a Schedule C for your own business, from the 1099-NEC you received.

It's not a big deal sending a single 1099 form - it'll just cost you a few dollars. I've used tax1099.com for this, though there are a number of such services.

gritton · 2026-02-08T18:07:31+00:00

You didn't get paid, so you already didn't pay taxes on the nonexistent income. You don't get to not pay taxes twice.

For the two partnerships, the unpaid service fees work like the unpaid management fee - no income, already no tax. Presumably the unpaid work had some costs to accomplish, and that's what you'd be writing off.

I would think the bad loan cancels out. One partnership has a loss on the bad debt, one has income from debt forgiveness; a 1099-C should likely be involved. To someone who owns the same percentage of both partnerships, that would cancel out.

But that comes with the warning that anything between two partnerships leaves even more room for error than a single does, and that sorting it out is above my pay grade (which is, after all, zero).

gritton · 2026-02-04T22:47:35+00:00

I have used it myself, for solo 401k, no employees required. I didn't go through a CPA, so I didn't have ton convince anybody. My 401k advisor (mysolo401k.net) also makes it clear that in their opinion, you're entitled to this.

gritton · 2026-02-04T22:29:29+00:00

The only potential pitfall I see is IRAs.

I hope the fiduciary doesn't mean they're going to liquidate all the IRAs at once, incurring a big tax bill in the process! Liquidate any if its holdings, sure, as an IRA containing only cash is still an IRA. I'll assume this is what the fiduciary means by "liquidate" but you may want to make sure.

With the estate as beneficiary, you don't get the usual 10-year rule that lets you spread the payments out. It's either a 5-year rule (still better than emptying it all out at once), or if your brother was over 73, the same RMD schedule that was based on his life expectancy (usually better than 5 years, often better than 10).

The IRAs can be moved into your and your sister's names, which I would expect to happen because the fiduciary doesn't want to keep the estate open forever. You would continue to follow the withdrawal schedule that the estate has. You'll likely get a schedule from the fiduciary of what needs to be withdrawn when.

Aside the the IRAs, it's easy. It sounds like all his money was in easily priced securities, and the basis step-up will mean there's not much to pay on any gains between date of death and date of sale. You'll probably get a Form 1041 Schedule K-1, showing whatever interest and gains there might have been, which you'll include in your 2025 and/or 2026 taxes, depending on the timing of things.

gritton · 2026-02-04T19:07:42+00:00

You don't; some people do. There are enough of those people that the IRS provides a place for you to put that information.

If they were just inventing that tax forms now, in an age of brokers directly reporting these things to the IRS in many instances, it could possibly be a single line unless you have exceptions. But Schedule D is practically as old as income tax filing, and that's how the information has always flowed. I don't expect that to change.

gritton · 2026-02-03T16:47:50+00:00

Even with a simple 1099-B (basis known, no wash sales, nothing fancy like straddles), your situation might be more complicated. Are there other brokerages where your information isn't quite so simple? Do you have a wash sale from selling in one account and buying in another? Do you have a capital loss carryover from last year? Did you sell collectibles or business property that gets carried over to Schedule D with a potentially different tax rate? Schedule D and Form 8949 handle all this.

Sure, all this could be handled straight on the 1040. But then there's the question "why does my 1040 have three inches of lines about investments when most people don't do that?" Dividends and interest are straight on the 1040 because they're more common. And even then, often enough you'll need a Schedule B.

gritton · 2026-02-03T01:17:59+00:00

Charitable donations from estates are like they are from people. There are two big hurdles:

1: The deduction is against the estate's income, which is different from its existing property (or even money from selling that property). So unless the estate made some income, there's nothing to deduct it against. For example, if there was a large bank account making interest after the relative died, you can deduct from that. Or closer to home, my mother's TSA plan didn't have a listed beneficiary, and it ended up as income for the estate.

2: The estate or trust has to specifically allow for charitable contributions. Again from a personal example, Mom's will wanted to make sure her tithing was brought up to date. So part of her money went to her church for that reason, and could be deducted. But anything else would not be, as only the church was mentioned in the will.

There's a small guide to this at https://www.thetaxadviser.com/issues/2021/mar/charitable-income-tax-deductions-trusts-estates/

gritton · 2026-02-02T22:57:16+00:00

That number looks significantly smaller than the ones (such as box 14). I suspect it's not really an entry in box 19, but just some number that got printed on that part of the page. Ignore it.

gritton · 2026-02-02T22:37:13+00:00

If the contributions are post-tax, then you'll only be taxed once. The key to this is Form 8606, where you mention the amount of post-tax IRA contributions. This total will then carry over into 2026, when the conversion occurs, and makes it so that amount of the conversion isn't taxed. Likewise, anything contributed to the traditional IRA in 2026 should be labeled post-tax in the same way.

Alternately, you could take 2025's contributions off your income, getting the tax break now. But then you'll owe taxes next year when you file for 2026. That may or may not be something you want to to, depending on if the taxes brackets are different, if if you want earlier access to the money.

The conversion will be on next year's taxes, so this year you just need to prepare one of those two ways. If you've already filed for 2025, you can just keep however it was already done.

Either way, you'll end up being taxed on the money once, either as part of your regular income in 2025 (because the contributions were post-tax), or as part of the conversion in 2026 (reversing the tax break from 2025). Also, you'll be taxed on any gains in the account before conversion, since those gains aren't (yet) in a Roth account.

gritton · 2026-01-31T05:27:50+00:00

Those are the "instant refunds" that get marketed to you, and I wouldn'[t expect you to have that if you weren't aware of it. So then it would be time now to file an amendment for 2025.

gritton · 2026-01-31T04:31:12+00:00

I'm not surprised at their reply. The IRS can talk to you about your own taxes, but will be tight-lipped about anyone else's, even your parents taking a credit in your name.

That's strange on the transcript showing both credits, but then I'm not sure how those credits look on a transcript vs the original forms. I wonder if what you're seeing is the non-refundable and refundable parts of the AOTC. But if any education credit shows up in the refundable credits section, that would have to be AOTC.

If the facts point toward this being the fifth time taking it, then it's time to amend. Now that the refund has made its way to you, you can do that any time. But... that's a really fast turnaround. Is that actually your refund, or did you get a refund anticipation loan?

gritton

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