Am I liable for an accountiuing mistake?

UPDATED: Nov 12, 2012

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Am I liable for an accountiuing mistake?

A few months ago I cashed out my IRA to pay off debt. I spoke with my broker several times before I did so. I had lost my job and had been struggling to pay bills. I received a letter a few days ago stating that there had been an error in my pay out. A contribution had been made to my account in error and they want me to repay it within 2 weeks ($7500) I do not have this money. I paid off debt. I also paid the 10% penalty and will pay taxes on this amount at the end of the year. What are my rights?

Asked on November 12, 2012 under Bankruptcy Law, Alabama


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If you were accidentally paid money to which you are not entitled, you have to repay it--an error does not give you the right to keep the money, any more than if you accidentally gave the pizza deliverer two $100 bills to pay for a $20 pizza instead of two $10 bills, he'd be allowed to keep that money.

However, you should then be entitled to recover the 10% penalty on the excess, and should get a credit for overpaying your taxes.

The fact that you have used the money already does not give you any rights to not repay it, either. If you do not repay, you can be sued for the money.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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