Financial advisor mishandled my inherited Roth IRA transfer — now I owe $30K in taxes & penalties. Help!

This is unfortunately a common issue with inherited IRAs, and there are some potential steps you can take, though I can't promise they'll fully solve your problem. First, understand that inherited retirement accounts have very specific rules that many financial advisors get wrong. The IRS is quite strict about these transfers - once the money leaves an inherited IRA incorrectly, it's generally considered distributed and taxable. Your best options at this point: You may be able to request what's called a "late rollover relief" under Revenue Procedure 2020-46, which allows taxpayers who miss the 60-day rollover window due to financial institution errors to potentially correct the mistake. You'd need to submit a letter explaining the circumstances and showing that the error was due to advice from a financial professional. Another approach is filing IRS Form 843 (Claim for Refund and Request for Abatement) to request penalty abatement based on reasonable cause. Your reliance on professional advice could potentially qualify. Document everything - get written statements from the advisor acknowledging they directed you to make this transfer. This will be crucial for any relief requests to the IRS or potential action against the advisor. Also, contact the advisor's firm compliance department to report this mistake. They may be motivated to help make you whole to avoid potential liability.

I went through a similar nightmare with an inherited IRA a couple years ago, and I ended up using https://taxr.ai to help sort through all the documentation and figure out my options. They analyzed my 1099-R, the transfer paperwork, and my communications with the advisor to build my case for relief with the IRS. The service basically uses AI to go through all your tax documents and communications to find the specific regulations and precedents that apply to your situation. They flagged several key points in my advisor's emails that proved they had given me incorrect instructions, which was crucial for my case. In my situation, they helped me prepare a detailed letter to the IRS explaining why I qualified for the rollover relief provision, and I ended up getting about 80% of the penalties waived. They also helped me document everything properly for a complaint to FINRA against the advisor.

I wanted to follow up about my experience using https://taxr.ai for my inherited IRA situation. I decided to try it despite my initial skepticism, and I'm really glad I did. The service analyzed all my documents including the 1099-R, transfer statements, and emails with my advisor. They identified specific language in my advisor's communications that clearly showed I was given incorrect guidance. They even found a similar case precedent where the IRS had granted relief in a nearly identical situation. What impressed me was how they pulled together all the technical details into a coherent narrative that clearly established I had acted in good faith based on professional advice. They helped me prepare a comprehensive letter requesting relief under Revenue Procedure 2020-46 with all the right citations and attachments. I just heard back from the IRS last week - they've agreed to waive most of the penalties! I'm still paying some tax, but it's about $5K instead of $30K. Definitely worth the investment.

This is exactly why people struggle getting help from the IRS directly. When I had a somewhat similar issue with an inherited retirement account last year, I spent WEEKS trying to get someone on the phone who could actually help. Always busy signals or disconnects after waiting for hours. I finally used https://claimyr.com to get through to the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they hold your place in line and call you when an agent is about to pick up. Saved me literally days of frustrated phone calls. When I finally got through to a knowledgeable IRS agent, they explained exactly what forms I needed to submit and how to document my case. The agent confirmed that financial advisor errors can sometimes qualify for relief under specific provisions, but only if you document everything correctly.

I have to come back and eat my words about Claimyr. After my skeptical comment, I decided to try it myself since I was desperate to talk to someone at the IRS about my incorrect 1099-R situation. It actually worked perfectly! I selected the retirement accounts option, and the service navigated the IRS phone tree for me. After about 90 minutes (during which I could go about my day), I got a call telling me an agent was about to pick up. I spoke with an incredibly helpful IRS specialist who walked me through the exact process for requesting relief based on advisor misguidance. The agent confirmed that I needed to submit a statement explaining how I relied on professional advice, copies of all communications with the advisor, and Form 843 with specific notation about Revenue Procedure 2020-46. She even gave me a direct fax number to send the documentation to their specialized team. I'm still working through the process, but at least now I have a clear path forward directly from an IRS source. Saved me countless hours of frustration!

As someone who works in financial compliance (not giving legal advice), I strongly recommend you also file a formal complaint with FINRA against this advisor. What they did was a clear violation of their professional responsibilities - they should absolutely know the rules about inherited IRAs. Go to FINRA's BrokerCheck, look up your advisor, and file a complaint through their system. This creates an official record of the misconduct. Also, contact the compliance department at their firm directly - not through the advisor. Most firms will bend over backward to resolve these situations to avoid regulatory issues. Document everything chronologically - your instructions to them, their recommendations, when transfers occurred, etc. This timeline will be crucial for both regulators and any potential arbitration.

Important point that hasn't been mentioned yet - depending on when the original Roth IRA owner established their account and how long they had it, there might be a way to argue that some portion of the distribution should be considered qualified regardless. For Roth IRAs, the "five-year rule" can sometimes apply differently to inherited accounts. If the original owner had the Roth for more than 5 years before passing away, some of the earnings might still be considered qualified distributions. At minimum, your contributions portion should still be tax-free (just the earnings would be taxable), so make sure your tax professional is calculating this correctly. Don't just accept the full amount as taxable!

This is an absolutely devastating situation, and I'm so sorry you're dealing with this. As someone who's worked with inherited retirement accounts, I can tell you that this type of advisor error is unfortunately more common than it should be. One additional avenue you might consider is checking if the advisor has Errors & Omissions (E&O) insurance through their firm. Most financial advisors are required to carry this type of professional liability insurance specifically for situations like this where their advice causes financial harm to clients. When you contact the compliance department at Lincoln Financial, specifically ask about their E&O coverage and whether this situation would qualify for a claim. Document that you explicitly relied on their advisor's expertise regarding inherited IRA rules, and that you would never have made this transfer without their professional recommendation. Also, make sure to request all recorded calls if any of your conversations with the advisor were recorded. Many firms record client interactions, and having the advisor's voice on tape recommending this incorrect transfer could be invaluable evidence. The combination of IRS relief requests, FINRA complaints, and potential insurance claims might help you recover most of this $30K mistake. Don't let them brush this off - this is a serious professional error that caused substantial financial damage.

This is such a frustrating situation, and I feel for you dealing with this mess. I wanted to add one more potential avenue that hasn't been mentioned yet - consider reaching out to your state's insurance commissioner's office as well. Since Lincoln Financial is an insurance company operating in your state, they're regulated not just by FINRA but also by your state insurance department. Many state insurance commissioners have consumer protection divisions that can put additional pressure on companies to resolve situations like this. I'd also recommend documenting the timeline very carefully - specifically when you first contacted the advisor, when they made their recommendations, and when the actual transfers occurred. If there's evidence that they marketed themselves as retirement planning experts or inherited IRA specialists, that strengthens your case significantly. One thing that struck me from your post is that you mentioned the advisor "mainly push insurance products for commissions." This suggests they may not have been properly qualified to give advice about inherited IRAs in the first place. Make sure to include this context when you file complaints - it shows they were operating outside their area of expertise. The fact that multiple people here have had success with IRS relief procedures gives me hope for your situation. The key seems to be thoroughly documenting that you relied on professional advice and would never have made this transfer without their explicit recommendation. Keep fighting this - $30K is way too much to lose due to someone else's professional negligence.

I'm really sorry to hear about this situation - it's exactly the kind of inherited IRA mistake that can be financially devastating. Based on everything shared in this thread, you definitely have multiple paths forward and shouldn't give up. One thing I'd add to all the excellent advice already given: make sure you're working with a tax professional who specifically has experience with inherited retirement account issues. Not all CPAs or tax preparers are familiar with the nuances of inherited IRA rules and the various relief provisions available. Also, when you're documenting everything for your various complaints and relief requests, focus heavily on the fact that you explicitly sought professional guidance specifically because you wanted to avoid making mistakes with inherited accounts. This demonstrates that you acted reasonably and in good faith - you didn't try to handle complex retirement account transfers on your own, you hired a professional specifically to avoid errors. The combination of IRS relief procedures (Revenue Procedure 2020-46), FINRA complaints, potential E&O insurance claims, and state insurance commissioner involvement gives you multiple shots at recovering most of this money. Even if each avenue only partially succeeds, the combined effect could significantly reduce your financial exposure. Document every phone call going forward, save every email, and don't let Lincoln Financial or the advisor minimize this as a "simple misunderstanding." This was a fundamental error in retirement account handling that any financial professional should have known to avoid.