60 day rollover question
L1: 60 day rollover questionMy trustee incorrectly made a $10,000 distribution from my IRA and I want to return it to the same account within the 60 day rollover period. The IRS states that if I do this rolloeverI may not make a tax-free rollover of any previously distributed amount within one year, from the IRA that received the 60-day rollover. Does this mean that only that $10,000 cannot be used for a rollover within the year or is the whole account restricted from doing a rollover? For what it is worth I have passed the age of 59 1/2 but I think that is not relevant to this question.2009-03-04 14:44, By: John, IP: [18.104.22.168]
L2: 60 day rollover questionHere is a link to IRS Pub 590: http://www.irs.gov/publications/p590/
Here is the limitation outlined in IRS Pub. 590:”Waiting period between rollovers. Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA.”
Short answer… it applies to the whole account.
Hope this helps.2009-03-04 15:43, By: Gfw, IP: [22.214.171.124]
L2: 60 day rollover questionAs gfw indicated, the restriction applies to the entire account and would also apply if you rolled it to a new or another IRA account as well. However, only the 10,000 would become taxable, not the whole account because you would elect to report the largest rollover and pay taxes on the smallest one. Therefore, you must look back 12 months before completing a rollover as well as being aware that you are limited for the next 12 months if you can make the current rollover. During that period, be sure to move funds only be direct transfer, as these are unlimited.
If you happen to be a 72t plan participant, preserving your permitted rollover is even more important since it can be a tool for correcting a distribution that exceeds your annual 72t amount. If you need to move funds in a 72t account, always elect the direct transfer option to preserve the rollover as a safety feature.
As you indicated, age is not relevant to this issue.
2009-03-04 18:00, By: Alan S., IP: [126.96.36.199]
L3: 60 day rollover questionAlan and GFW (I think it is Gordon but I could be wrong),
Thank you for the replies and additional detail.
Let me clarify one more point.
Do I understand that a trustee-to-trustee transfer then is also not permitted?2009-03-05 04:55, By: John, IP: [188.8.131.52]
L4: 60 day rollover questionA trustee to trustee transfer is always permitted with respect to the 12 month rollover limitation because these do not count as rollovers, and should not be reported if they are between IRA accounts.
However, for 72t purposes, a transfer could bust a plan if funds are deposited into a non 72t IRA or contributions are made to a 72t IRA that do not originate from another 72t IRA account. This is a totally separate issue from the rollover limitation.
2009-03-05 21:31, By: Alan S., IP: [184.108.40.206]
L5: 60 day rollover questionThank you again Alan for the extra clarification.
My 72(t) was completed almost a year ago so that doesn’t factor into the situation.
I had set up what I thought was a one time distribution to complete my 72(t) in early 2008 and then my trustee mistakenly repeated that distrbution at the start of this year.
From the feedback I think I have these options:
1) don’t return the distribution and just deal with the increased income/tax liability for the year
2) return the distribution within 60 days of distribution and:
a) leave the funds with this trustee and make investment choices through them
b) can make normal distributions from this trustee as needed without limitation
c) can make trustee-to-trustee trnasfers within 1year with no limitation
d) just do NO rollovers with this trustee or any other trustee
I think I can deal with that.2009-03-06 05:00, By: John, IP: [220.127.116.11]